Govt queries future of telco market abuse rules

The federal government will formally review the future of laws introduced in 1997 to prevent Telstra abusing its market power in an ‘open’ telecommunications market.

The review, unveiled today by the Department of Communications, could see Part XIB of the Competition and Consumer Act scrapped or harmonised with proposed changes to section 46 of the same Act.

Proposed changes to section 46 – which deals with the misuse of market power generally by businesses – were unveiled by the government earlier this year in response to a recommendation by the Harper Review.

In addition to section 46, telecommunications providers have also been subject to their own misuse of market power rules, known as Part XIB.

Part XIB has fuelled a number of regulatory and legal skirmishes over the years. The best-known use of Part XIB saw Telstra’s ADSL broadband service opened to wholesale competition.

“In 2001, Telstra launched an ADSL broadband service into the market but refused to offer a wholesale version of the service that allow its wholesale customers to compete with Telstra’s retail service,” Optus recalled in a Treasury submission earlier this year.

“In this instance the ACCC determined that Telstra’s action was likely to lead to a significant lessening of competition and had breached the competition rule under Part XIB of the Competition Act.

“Telstra was required to open up wholesale access to the service and competition not only drove rapid take-up of broadband, it also enabled Telstra’s competitors to lead the next phase of innovation with the upgrade to ADSL2+.”

Part XIB also allows the ACCC to issue “competition notices” for alleged anti-competitive behaviour. They were intended as a fast remedy for the regulator, which could then seek financial penalties in court.

The last competition notice was issued back in 2006 against Telstra for raising wholesale line rental prices without adjusting its own retail prices. Optus also sued Telstra over the pricing at the time.

However, the government has questioned whether Part XIB should continue to operate in its current form.

“Part XIB was introduced in 1997 to facilitate the transition to open competition in the telecommunications market,” the government said.

“At the time of its introduction, open competition was only beginning and Telstra had a dominant role. Parliament decided that specific regulation was needed to facilitate prompt action against anti‐competitive conduct in the telecommunications sector.

“Part XIB was always envisaged as a transitional regime for the telecommunications sector. Telecommunications markets and industry structures have changed since 1997, with an increase in market participants and the rollout of the national broadband network.”

In addition to a revised section 46, the government questioned whether competition notices under Part XIB were an effective enforcement tool available to the ACCC in 2016.

The ACCC now has access to “additional means [of enforcement] not available in 1997, including setting terms and conditions, including price, and issuing binding rules of conduct” under evolved Part XIC rules in the same Act, the government said.

It is accepting submissions on the future of Part XIB until the end of this month.