Government tables comprehensive Telecommunications Reform Package

Telco-related businesses and consumers will be interested in the Government's recently released legislative package that promises wide-ranging reforms to Australia's telco landscape. 

The Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 and the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 are intended to promote competition and to improve access to broadband services for all Australians, especially those in regional, rural and remote areas, via the following key measures:

• the introduction of a funding mechanism for regional broadband services, which will fund the net costs of NBN Co Limited's fixed wireless and satellite networks;
• the introduction of a statutory infrastructure provider regime; and
• amendments to the superfast network rules to clarify the wholesale only rules applying to high speed broadband networks.

The proposed changes (if passed by Parliament), are expected to take effect from 1 July 2018.

Regional Broadband Scheme

The Regional Broadband Scheme is designed to provide sustainable funding for the National Broadband Network (NBN) fixed wireless and satellite networks in regional Australia.

The draft Bills propose an industry charge of around $7.10 per month that carriers would be required to pay for each premises on their network that has an active fixed-line superfast broadband service.

The charge was foreshadowed by Government in its December 2014 response to the Independent Cost-Benefit Analysis of Broadband and Review of Regulation (the Vertigan Review), and is designed to make the existing cost transparent and spread it across all NBN comparable networks.

Statutory Infrastructure Provider (SIP) regime

The Bill implements a new SIP regime to provide industry and consumers with certainty that all premises in Australia will have access to infrastructure that supports the delivery of superfast broadband services.

The proposed SIP arrangements require NBN Co to connect premises to its network and supply wholesale high speed broadband services to phone and internet service providers. During the rollout of the NBN, NBN Co will have SIP obligations in all areas where it is supplying carriage services. After the rollout is complete (and an area is deemed to be Ready for Service) NBN will become the default statutory infrastructure provider. In some new developments, it may be the case that other carriers will be able to fulfil the role of SIP, for example, where a carrier is the sole provider of infrastructure in a new development. The SIP obligation also provides wholesale access to broadband infrastructure for retail service providers so they can service their retail customers .

There are three key elements to the proposed SIP regime—identifying the SIP, the obligations of the SIP, and the processes to be followed when a SIP does not or cannot meet the SIP obligation. 

In good news for consumers, one primary obligation of the SIP is to offer a wholesale broadband service supporting peak speeds of at least 25 mbps download and 5 mbps upload regardless of location. Put differently, this ensures that all Australians - regardless of where they live - will be able to order a high speed broadband service. SIPs must also supply wholesale services that retail providers can use to support voice calls on fixed-line and fixed wireless networks.

Reform of the level playing field rules

The aspect of the package which is said to promote competition is the reform of the "level playing field".  

Currently, the superfast network rules require that superfast fixed line networks servicing residential and small business customers must supply a wholesale bitstream service to access seekers and operate on a wholesale-only basis (ie. be structurally separated). There are a number of exceptions to these rules, such as high speed networks that were built prior to 1 January 2011.

The key changes to the rules are:

• The Bill removes regulation of networks servicing small business customers, which will enable these providers to benefit from greater competition in the market.
• The changes allow the ACCC to exempt small smart-up networks (operators with fewer than 2,000 retail residential customers on fixed-line networks) from separation rules, in order to encourage entry into the market and the growth of new providers. The statutory exemption could be extended in the future (by regulation) to operators (with up to 12,000 retail residential services).
• These reforms would effectively allow network carriers (other than Telstra and NBN Co) to be vertically integrated - that is, to operate both wholesale and retail businesses on a functionally separated (that is, arm's length) basis, subject to ACCC approval. Networks operating on this basis will be required to meet core requirements, including the operation of separate wholesale and retail business units, and the provision of wholesale layer 2 bitstream service.
• Finally, all services supplied on wholesale-only or functionally separated networks will be subject to clear non-discrimination obligations.

What should we do?

As noted in the second reading speech, the Bill makes important changes to the broadband regulatory framework to strengthen the provision of superfast broadband infrastructure across metropolitan, regional, rural and remote Australia.

As many businesses would already be familiar with the broad reforms (given the extensive policy development and public consultation process), now is the time to more closely review the legislation, including the expanded powers and enforcement tools that will be provided to the ACCC. Some telco providers will be affected by the reforms and may wish to seek advice regarding compliance with the proposed structural separation requirements.

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