The Australian Competition and Consumer Competition (ACCC) has commenced a public inquiry into the regulation of asymmetrical digital subscriber line (ADSL) services in Australia. Currently, the ACCC regulates ADSL services at the wholesale level, allowing service providers to offer high-speed fixed-line broadband services.
As ADSL is currently a “declared service”, the owner of the network infrastructure must grant access to the service upon request. This ensures all service providers have access to the infrastructure to supply communication services such as broadband to end-users. This article sets out the current considerations that are before the ACCC on the regulation of ADSL services in Australia.
ADSL as a Regulated Service
ADSL services are the dominant technologies used to provide high-speed fixed-line broadband internet services. In February 2012, the ACCC declared access to wholesale ADSL services, which meant the service was regulated under legislation. Service providers become subject to standard access obligations (SAO).
Part XIC of the Competition and Consumer Act 2010 (CCA) set outs a comprehensive regime for access to “declared services” in the telecommunications industry. For example, the CCA gives the ACCC power to set default prices and other terms and conditions of access to declared services. Businesses that provide services through a declared service (i.e. TPG and Dodo) must comply with the CCA.
The ACCC’s Current Public Inquiry
The current declaration will expire next year in February 2017. Accordingly, the ACCC has now begun a public inquiry to decide whether it should renew, vary, revoke the declaration, or allow the declaration to expire. The ACCC is now accepting submissions, which will close on 29 July 2016. The ACCC aims to finalise its decision in early 2017 before the current declaration expires.
What Must the ACCC Consider?
The ACCC may renew this declaration if it is satisfied that in making the declaration it will promote the long-term interests of end-users. In making this determination, the ACCC must consider the extent to which the new declaration will achieve the following objectives:
- Promotion of competition in the markets for telecommunication services;
- Achieving any-to-any connectivity; and
- Encouraging the economically efficient use of, and investment in, the infrastructure by which telecommunications services are supplied.
Economic Rationale for Declaring Services
The ACCC submitted, as part of its discussion paper for the public inquiry, that renewed declaration is likely to promote the long-term interests of end-users, particularly when the framework is enduring bottlenecks or holdups. Without renewed declaration, there is potential for barriers to competition. This can lead to one operator having market power in certain areas. Operators may hold a monopoly to charge prices for access to its infrastructure.
If regulated, service providers will not be able to exercise a monopoly over infrastructure and will not have unlimited discretion in applying high prices. This, in effect, promotes competition. Another consideration of the ACCC relates to vertical integration. Vertical integration is where a company controls several or all of the distribution or production steps involved in the delivery of a service. If unregulated, and where vertical integration exists, the operator will have the power to restrict access to the facility from its competitors. This would demote competition in the marketplace.
It is of note that since the declaration of the wholesale ADSL service, some industry developments have occurred. These changes have significantly changed the dynamics of the internet industry and relevant to the ACCC’s current inquiry.
The National Broadband Network (NBN) did not exist when ADSL was declared as a regulated service. The NBN is a national wholesale-only telecommunications network that provides high data rate broadband services to Australians. Currently, NBN services are not as widely available as ADSL. However, various improvements are being made to the NBN service that is currently in the works. The projected completion date for the NBN is 2020.
At the same time the NBN was implemented, fixed-line and mobile broadband services also came to the forefront of internet services. At least 85 percent of Australians have a fixed-line internet connection now. Mobile broadband is now the most common form of broadband connection.
A number of industry changes have taken place since its first declaration in 2012, including the rollout of the NBN and the increasing use of fixed-line broadband services. The current regulation of ADSL makes it affordable and facilitates internet access. By ensuring it is a declared service, the ACCC will likely continue its role in promoting the long-term interests of end users.
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