ECONOMICS LEGISLATION COMMITTEE

Discussion

NB - Due to the length of the full transcript of this hearing, the following is an extract.

CHAIR—Senator Joyce had some questions on Telstra.

Senator CONROY—I have no doubt about that.

CHAIR—If you do not mind, Senator Conroy, if Senator Joyce has questions on the same area, I might give him the call for a while.

Senator JOYCE—You have just mentioned the ACCC’s drive to maintain an antimonopoly process. Do you feel that you currently have enough powers to pursue that process and do you know of any threats to that process into the future and your ability to monitor the monopoly structure of Telstra?

Mr Samuel—We think that the regulatory regime that has been in existence, as enhanced by the legislation that was passed in September, is going to provide us with a significant enhancement in our ability to enforce the processes available to us under both part IV of the Trade Practices Act and then parts XIB and XIC. You ask whether there are any issues that can impede our ability to deliver that process. Much will depend, of course, upon the development of the operational separation framework. We have offered comments on that over the past few minutes.

In addition, the ability to deal with these issues depends upon the rigour with which we examine and deal with any anticompetitive conduct on the part of Telstra. Our ability to deal with that is going to be, we think, reasonably significantly enhanced by the operational separation provisions that were, in framework terms, legislated for back in September this year. We will of course await the outcome of the discussions and then, ultimately, the ministerial determinations in respect of those matters to see the effectiveness of those provisions and how much easier it will make it for us to be able to determine whether or not Telstra is behaving in an anticompetitive manner and, thus, enable us to exercise our powers under part XIB of the act.

Senator JOYCE—Is there anything that would, with regard to part XIB, for instance, actually assist you to do your job? Is there any strengthening of legislation that would assist you? Obviously, with Telstra you struggle. That is a fair comment as to how they have complied with what you say or how they actually work in some constructive manner with what you require. Do you have any suggested strengthening of any legislative regime that would give you more of an effective handle on someone like Telstra?

Mr Samuel—Let me by way of a precursor to providing an answer to that point out that the struggle appears to be, certainly in amplified terms, mostly on the part of Telstra. Telstra is the one that seems to be complaining most about the regulatory burden. The ACCC has not expressed, particularly since the legislation was passed in September this year, and has not indicated publicly any significant concerns with the regulatory regime. I think we will have to see how it transpires over time. But the enhancements that were provided in the September legislation do provide us with, we think, a very workable model for operational separation. Operational separation is not a means or is not an end in itself. It is a means to an end and the means is to provide transparency and equivalence in Telstra’s dealings with its wholesale customers, as it does with its own retail division. We believe that the experience we had last year in dealing with the broadband competition notice showed up some weaknesses in part XIB. We think that for the most part those weaknesses have been dealt with by the legislation and the framework that was established by that legislation in September this year. I might note, by the way, that the financial penalties that are now able to be imposed on Telstra for engaging in anticompetitive conduct that falls foul of part XIB have, I think, been tripled, which imposes some quite significant financial burdens on Telstra in the event that we do detect anticompetitive conduct.

Senator JOYCE—Do you have any constraints in time or are there any other constraints that affect how you can effectively monitor Telstra, and do you know of anything impending into the future that might affect that?

Senator CONROY—He cannot say anything other than they are going fine at the moment.

CHAIR—Senator Conroy, let Senator Joyce frame his own questions and let Mr Samuel respond to them.

Mr Samuel—I would genuinely answer that if we felt that there were significant constraints I would obviously give you an honest response. But I can say to you that the regulatory framework that is there is a workable model. There will always be time constraints involved in the process of dealing with anticompetitive conduct or in dealing with access issues and access pricing issues. In dealing with anticompetitive conduct, one of the most significant impediments that we have is the failure of others within the marketplace that may be affected by Telstra’s anticompetitive conduct to provide us with the necessary evidence, the substantive evidence, necessary to be able to prosecute a case. We highlighted that in relation to the broadband competition notice. I think we have been assisted by the operational separation legislation that was passed in September this year. In dealing with access issues and access pricing, unless a dispute is brought to us, it is difficult for us to deal with these issues other than in the manner of sitting and waiting for undertakings to come from Telstra and then to have those undertakings rejected. That can go on forever. But, ultimately, that matter is brought to a head by a dispute being brought to us which enables us to make a final arbitration on those issues.

Senator JOYCE—You have already answered my next question. So you obviously believe that since the passage of the September legislation your position has been strengthened in such a form that you can better monitor how Telstra works within the marketplace. That has been affected in quite a substantive form?

Mr Samuel—Yes, subject to the final determination by the minister of the operational separation framework. But as I have indicated, I think that the minister has already indicated, and demonstrated a determination to bring about an operational separation framework that will serve the objective that she outlined when the legislation was introduced.

Senator JOYCE—So regardless of the ownership of Telstra, prior and post the passage of the September legislation, the position of the people wanting to compete with Telstra or the consumer has been strengthened?

Mr Samuel—Yes. The ownership of Telstra actually makes no difference at all to the operation of the competition or the anticompetitive provisions of the Trade Practices Act. I indicated before you came in, Senator, in my opening comments that the ACCC remains agnostic over the ownership of Telstra. It matters not one iota to us whether Telstra is wholly owned by government or government owns not one share in it. The regulatory regime operates irrespective and it is designed to bring about a competitive environment in the sector of telecommunications in this country. We think that the regime has been developed to a level that would enable a workable process to be adopted to bring about that competitive outcome and objective.