The Australian telecommunications access regime Presentation to ACMA International Training program 2006 Michael Eady Communications Group Compliance and Regulatory Operations Australian Competition and Consumer Commission

The telecommunications access regime Overview of the regime Declaration Model terms and indicative prices Access disputes and arbitrations Undertakings Conclusion

1. Overview of the regime

Aims of the regime Part XIC of the Trade Practices Act 1974 The aim of the regime is to “promote the long-term interests of end-users” The regime is designed to be non- intrusive and promote commercial negotiation rather than regulator actions.

A telecommunications regime The telco access regime was introduced in It was felt that there were particular features of the telecommunications sector that required an additional and separate access regime.

Long-term interests of end-users (LTIE)? Promote competition Ensure any-to-any connectivity Encourage: –economically efficient use of infrastructure –economically efficient investment in infrastructure

How does it work? Four main aspects Declaration of a service Model terms and/or indicative prices Arbitration of access disputes Undertakings

2. Declaration

9 What does declaration mean? If a service is not declared –it is not subject to regulation –carriers may provide the service to other carriers, or not, as they wish. If a service is declared –it is subject to regulation –carriers must comply with standard access obligations.

10 How does declaration occur? Declaration can only occur if the ACCC is satisfied that declaration will promote the long-term interests of end-users. The ACCC must hold a public inquiry, and prepare and publish a report, before it can declare a service.

11 How does declaration occur? The ACCC needs to assess the need for regulation against the LTIE criteria discussed before –promotion of competition –ensuring any-to-any connectivity –economically efficient use of and investment in infrastructure

12 What factors would the ACCC examine? Indicators that the ACCC might examine –market shares –pricing conduct of companies –existence of barriers to entry –presence of alternative services –presence of alternative infrastructure

13 What services have been declared? Declared services include: –Unconditioned Local Loop Service (ULLS) –Line Sharing Service (LSS) –Mobile Terminating Access Service (MTAS) –PSTN Originating and Terminating access service (PSTN OTA) –Local Carriage Service (LCS)

14 What happens once a service is declared? An access provider of a declared service is subject to standard access obligations: –must supply the service to other carriers –must ensure that the quality and fault handling of the service provided to other carriers is equivalent to that which it provides itself –must allow interconnection

15 What happens once a service is declared? Both access seekers and access providers can notify the ACCC of access disputes about the supply of the declared service. Access providers can provide undertakings with proposed terms and conditions of supply.

3. Model terms and indicative prices

17 What are model terms and indicative prices? Two similar tools Both give an indication of the ACCC’s view on the supply of declared services, but: –Indicative prices only relate to price –Model terms can relate to both price and non-price terms However most access seekers and providers are more interested in price

18 Indicative prices When the ACCC declares a service, it must provide pricing principles and may provide indicative prices Pricing principles state the general approach that the ACCC will take to pricing the service, e.g. –Total Service Long Run Incremental Cost (TSLRIC) –Retail-minus-retail-cost (RMRC)

19 Indicative prices Indicative prices demonstrate the application of a chosen pricing approach to generate particular prices The ACCC must have regard to those prices when arbitrating an access dispute

20 Model terms Similar to indicative prices but can relate to non-price terms as well, e.g. –network modernisation –billing procedures –creditworthiness –dispute resolution –confidentiality

21 How are model terms and indicative prices set? The ACCC considers model terms and indicative prices against the reasonableness matters in the legislation

22 Reasonableness When assessing reasonableness, the ACCC must consider: –the long-term interests of end-users –the legitimate business interests of the access provider –the interests of access seekers –the direct costs of providing access –operational and technical requirements –the economically efficient operation of the network or service

23 What do the model terms and indicative prices achieve? Idea of ACCC’s view: –the starting point it is likely to begin from when arbitrating an access dispute –a guide to how it might assess a submitted undertaking Guide to commercial negotiation –gives industry an idea of appropriate price and non-price terms for the service

4. Access disputes

25 What is an access dispute? Where two parties are unable to agree on the terms and conditions of supply of a declared service, one of them can: –notify the ACCC of an access dispute, and –seek arbitration of the dispute.

26 Telecommunications arbitrations Telecommunications arbitrations are different to many typical commercial arbitrations in other fields. –There is often a lack of mutual commercial incentive to reach settlement. –The ACCC’s arbitration must be conducted according to statutory direction rather than purely commercial considerations.

27 Conduct of an arbitration Arbitrations are conducted confidentially. Opportunity for written and oral submissions on both procedural and substantive matters. Other parties may apply to join dispute.

28 The ACCC’s role The ACCC will determine terms and conditions according to the reasonableness criteria: –the long-term interests of end-users –the legitimate business interests of the access provider –the interests of access seekers –the direct costs of providing access –operational and technical requirements –the economically efficient operation of the network or service

29 The ACCC’s role The ACCC may make both: –Interim determinations –Final determinations These determinations may, after consultation with the parties to the dispute, be made public.

30 Effect of an ACCC determination Sets terms and conditions (typically price) of access to the declared service between the two parties. An interim determination applies for up to one year or until a final determination. A final determination ends the arbitration and sets the terms and conditions of access for the service.

31 Effect of an ACCC determination There is no right of appeal on the merits of an ACCC determination in an access dispute.

32 How many arbitrations? The ACCC is currently arbitrating a large number of disputes: –ULLS – 9 disputes –LSS – 4 disputes –PSTN OTA – 4 disputes –Transmission – 1 dispute –MTAS – 19 disputes

5. Undertakings

34 What is an undertaking? An undertaking presents the access seekers’ proposed terms and conditions for supply of the declared service. An undertaking is initiated by the access provider. The ACCC cannot initiate undertakings.

35 Why have undertakings? Access disputes: –are bilateral –can require a lot of resources –can take a long time –may have an uncertain outcome The use of undertakings counter a lot of these concerns.

36 Recent undertakings December Telstra ULLS and LSS December 2004 – Optus MTAS April 2005 – Vodafone MTAS October 2005 – Foxtel Set Top Unit * October 2005 – Hutchison MTAS December 2005 – Telstra ULLS March 2006 – Telstra PSTN OTA and LCS

37 How is an undertaking assessed? The ACCC must assess the undertaking’s terms and conditions against the reasonableness criteria: –the long-term interests of end-users –the legitimate business interests of the access provider –the interests of access seekers –the direct costs of providing access –operational and technical requirements –the economically efficient operation of the network or service

38 How is an undertaking assessed? The ACCC can either accept the entire undertaking or reject the entire undertaking. It cannot accept parts of the undertaking or accept the undertaking conditionally. Public process with discussion paper, draft decision and two rounds of submissions from industry.

39 Rights of appeal An ACCC decision to accept or reject an undertaking can be appealed on the merits to the Australian Competition Tribunal. Recently, Telstra, Optus and Vodafone have all lodged appeals against ACCC undertaking decisions.

40 6. Conclusion

41 The telecommunications access regime Declaration Model terms and indicative prices Access disputes and arbitrations Undertakings

42 The telecommunications access regime Beyond initial declaration, requires access seekers and providers to approach the ACCC Favours commercially negotiated outcomes Main tools are undertakings and arbitrations Emphasis on “long-term interests of end- users” and “reasonableness”