May 2001

INFRASTRUCTURE INDUSTRIES

Typeset and Design: BH Graphics

Printed by Paragon Printers

ContentsThe benefits of competition 5

Competition time line 6

The Trade Practices Act 8

Industry-wide regulation 10

Competitive safeguards 16

Record-keeping and tariff filing 18

Price monitoring and compliance with price controls 19

The Telecommunications Act 22

Mergers and acquisitions 24

Consumer protection 27

Industry liaison 31

ACCC contacts 33

DisclaimerThis publication aims to give interested but non-technical readers

an understanding of the Australian Competition and Consumer

Commission’s role in administering access, competition, fair trading,

consumer protection and other law in the telecommunications industry.

It is intended as a broad guide to the ACCC’s work and to help people

assess whether they need further information. It is not and should not

be regarded as legal advice.

© Australian Competition and Consumer Commission 2001

ISBN 0 642 40289 2

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Since the late 1980s Australia’s

telecommunications industry has been

transformed from one controlled by government

monopolies to one in which a number of

separate carriers and service providers operate

in an increasingly competitive market.

Several factors contributed pressure for change.

The most significant were government policies

to increase efficiency and innovation through

greater competition; and new technologies,

which have created new services and new ways

of delivering traditional services.

Reform was introduced gradually, beginning

in 1989 when businesses were first allowed

to compete with Telstra’s newly corporatised

predecessor, Telecom, to provide customer

premises equipment and value added services

such as in-house switching equipment and

private networks.

Chairman’s introduction

More fundamental reform occurred in 1991

when the Government ended Telecom’s

monopoly right to provide telecommunications

carriage services. A second fixed-network carrier’s

licence was awarded to Optus Communications,

and Optus and Vodafone were awarded carrier

licences to compete with Telecom (by now

known as Telstra) in the mobile telephone

market.

Full competition in carriage services began in

1997. Any business that can satisfy the criteria

of the Telecommunications Act 1997 can be

awarded a carrier’s licence. By the end of

2000 there were more than 60 licensed

telecommunications carriers in Australia.

Added to this are many more businesses

providing carriage services, such as call resellers

and Internet service providers; and content

services, such as cable television.

P R O F E S S O RA L L A N F E L S

C h a i r m a n , A C C C

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Access undertaking. A voluntary undertaking by the serviceprovider that sets out the terms and conditions by which it will complywith the standard access obligations (which provide an immediate rightof access to declared services to access seekers).

Advanced mobile phone system (AMPS). The analoguemobile telephone service, now closed down throughout Australia.

Analogue transmission. Analogue transmission transmits thewave form nature of voices and other sounds.

Australian Communications Authority (ACA).The regulatory authority with responsibility for Australiantelecommunications and radio communications established under theAustralian Communications Authority Act 1997. The ACA took over thetechnical regulatory responsibilities of AUSTEL and the SpectrumManagement Agency (SMA) when they closed down in 1997.

Australian Communications Industry Forum (ACIF).An industry self-regulatory body, responsible for developing standards,codes of practice and service specifications.

Australian Competition and Consumer Commission(ACCC). The Commonwealth regulatory body responsible foradministering competition, access, fair trading and consumer protectionlaw under the Trade Practices Act 1974. The ACCC also has industry-specificresponsibilities under the Telecommunications Act 1997, the Airports Act 1996and other federal and State/Territory laws.

Australian Telecommunications Authority (AUSTEL).The former telecommunications industry regulator with both technical andeconomic responsibilities. AUSTEL operated from 1989 to 30 June 1997.

Bandwidth. The frequency of a transmission. Ordinary PSTN copperwire transmission systems are typically designed to carry an analogueelectrical signal in the bandwidth of 300 to 3400 Hertz. Cables and othertransmission media can carry electrical signals in much greater bandwidth.Coaxial cable, for example, can carry frequencies of up to millions of Hertz.

Bundling. The packaging together of products from differentbusinesses, e.g. a particular service is offered on a free or discounted basison the condition that the consumer acquire a second type of service froma second supplier.

Calling line identification (CLI). Data generated by a networkrelated to the telecommunications service of the originating call.

Carriage service. A service for carrying communications by meansof guided or unguided electromagnetic energy.

Terminology

Terminology3

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Carriage service provider (CSP). A business that supplies services to the public usingcarriers’ networks. They rent space on the networks and are not subject to licensing requirements, butmust comply with rules under the Telecommunications Act 1997 relating to the provision of operatorand directory assistance services, information for the maintenance of an integrated public numberdatabase and itemised billing.

Carrier. A business that owns telecommunications network units — specified line links and radiocommunications facilities — used to supply a carriage service to the public. Carriers are licensedunder the Telecommunications Act 1997.

Churn. The transfer (authorised or unauthorised) of a customer from one provider to another.

Competition notice. If the ACCC suspects that a carrier or carriage service provider hascontravened the Competition Rule (which says they cannot engage in anti-competitive conduct), itcan issue a competition notice to the company stating what the conduct is. A notice is prima facieevidence if the matter goes to court.

Customer service guarantee (CSG). A standard, originally introduced in January 1998,that provides for financial compensation to customers when prescribed performance requirements arenot met. Administered by the ACA.

Declaration. Formal notice by the ACCC that a service is now open to anyone who would liketo provide that service to seek access to it.

Digital transmission. Transmission of sound, images and other signals in the form of binarynumbers, using a numbering system that allows numbers to be represented by a series of the digitszero and one. These binary numbers are transmitted as electrical impulses if the transmission mediumis wire cable, or as light pulses if the medium is fibre optic cable. Wireless transmission is alsopossible.

End users. Household and business consumers.

Exclusive dealing. Involves one person trading with another, imposing restrictions on theother’s freedom to choose with whom, or in what, it deals.

Facilities Access Code (FAC). A requirement for carriers to provide other carriers withaccess to telecommunications towers, sites and underground facilities. The code was developed by theACCC and is enforced by the ACA.

Global system for mobiles (GSM). The digital cellular network standard used byAustralia and many other countries to provide mobile phone services.

Integrated public number database (IPND). A database of information aboutcustomers of telecommunications services in Australia, arranged by number, for all carriers andcarriage service providers.

Integrated services digital network (ISDN). A digital data access technology forvoice and data.

Interconnection. Interconnection has two meanings, one physical and the other economic.In its physical sense, interconnection refers to the connection of one network to another. If a service isdeclared by the ACCC, its provider(s) must provide physical interconnection to other carriers. In itseconomic sense, interconnection refers to the charges imposed by carriers for carrying other serviceproviders’ traffic on their network.

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Internet service provider (ISP). A service provider offering Internet access.

Leased lines. Telecommunications carriers may lease lines between fixed points to customerswith high communications needs. This reduces the need for switching and, with sufficient volume oftraffic, it is cheaper for a customer to lease a dedicated capacity than it is to pay in the normal way, ona call-by-call basis. (See also ‘Private network services’).

Local number portability (LNP). See ‘Number portability’.

Mobile number portability (MNP). See ‘Number portability’.

Number portability. Arrangements allowing customers to transfer from onetelecommunications service provider to another, or one location to another, without changingtheir number.

Private network services (PNS). Some large customers may acquire a number of leasedlines linking several locations. They may also install switching equipment in their offices that operateas mini exchanges, switching calls across different leased lines. In this way, customers can effectivelyestablish private networks. Some carriers supply the leased lines as well as network managementservices.

Public switched telephone network (PSTN). The most commonly usedtelecommunications network, which operates by switching calls on dedicated circuits and is designedto carry telephone (or voice) traffic. Most (non-mobile) telephones are directly connected to a PSTN.

Signalling systems. Signalling systems are used to transmit the necessary information aboutthe call being made, such as the telephone number to which the call is addressed, the type of call(e.g. a standard call, a conference call or a free call) and the telephone number of the calling party(calling line identification (CLI)).

Switching systems. Switching systems allow the temporary connection of a telephone oranother terminal device to that of another party.

Telecommunications Industry Ombudsman (TIO). An industry-fundedindependent dispute resolution service for consumers unable to resolve complaints abouttelecommunications carriers and carriage service providers.

Telecommunications network. A telecommunications network allows sound, video,computer data or other information to be transmitted between one telephone (or another terminaldevice, such as a computer or fax machine) to another. A telecommunications network has threeelements: a transmission system, switching systems and signalling systems.

Telstra. Formerly the Government-owned monopoly supplier of telecommunications services inAustralia, operating as Telecom Australia and the Overseas Telecommunications Commission (OTC).Telstra is a licensed carrier and private shareholders now own 49 per cent of it.

Transmission system. A transmission system comprises a transmission medium (such ascopper wire, coaxial cable, fibre optic cable and radio transmissions), public switched telephonenetwork links, and transmission interface equipment, which converts one form of transmission toanother (e.g. converting electrical signal on copper wire to light pulses in fibre optic cable, or to radiosignals).

Universal service obligation (USO). The obligation under the Telecommunications Act1997 to ensure that standard telephone services, payphones and prescribed carriage services arereasonably accessible to all Australians on an equitable basis, wherever they reside or carry onbusiness. Carriers tender to provide the USO in different geographic regions.

The benefits of competition

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In 2000 the ACCC published a report showing

that consumers benefited from continuing

price reductions of $300–400 per year in

telecommunications services between 1995 and

1999. Telstra’s average national long-distance call

charges fell 14 per cent, while Optus’ fell by

20 per cent. Major price reductions occurred in

international calls, while both mobile and local

call charges also fell. Consumers also benefited

from a range of service and charging innovations.

Most recently, competition has started

developing in the local services market, following

ACCC decisions requiring Telstra to allow access

to its ‘local loop’ infrastructure and to offer local

calls for resale.

Competition in mobile services, which initially

focused on subsidising handset prices, will

strengthen with the entry of new carriers

following the Government’s allocation of

additional radio spectra.

The ACCC’s roleLike all other industries, telecommunications is

regulated by the competition, fair trading and

consumer protection provisions of the Trade

Practices Act 1974. However, the special nature

of the industry — its production technology,

strategic position in the economy and the high

degree of market power held by Telstra — led

the Commonwealth Government in 1997 to

insert two new telecommunications-specific

parts into the Act.

Part XIB addresses anti-competitive conduct.

This gives the ACCC power to issue a

competition notice if it believes that a carrier is

engaging in anti-competitive conduct. A party

served with a notice has the onus of proving to

the Federal Court that its behaviour was not anti-

competitive. The Act provides for fines of up

to $10 million for each contravention, with a

further $1 million for every day it continues.

Part XIC ensures that carriers can access each

other’s network facilities on competitive terms

and conditions. The ACCC can declare certain

network services. The owners of these network

services must then provide access to other

businesses on reasonable commercial terms.

These provisions aim to overcome the market

power created by Telstra’s and, to a much lesser

extent, other carriers’ control of infrastructure

facilities and create the conditions for effective

competition.

The ACCC’s objective is to promote the long-

term interests of end users in households and

businesses.

The ACCC has several other roles in

telecommunications regulation. It participates in

co-regulatory arrangements and decision-making,

and also liaises with other regulatory agencies

such as the Australian Communications

Authority (which has responsibility for

technical regulation, licensing and spectrum

management), the Telecommunications Access

Forum and the Australian Communications

Industry Forum. The ACCC also collects industry

tariff data to monitor competition and monitors

prices and compliance with Government price

caps.

In addition to its telecommunications-specific

functions, the ACCC regulates the industry

through the general provisions of the Trade

Practices Act relating to mergers and acquisitions,

consumer protection and fair trading.

This publication aims to provide an overview of

the ACCC’s work in the telecommunications

industry.

The benefits of competition

1989

1975

1991

1993

1981

1975 The Australian Telecommunications Commission (Telecom Australia) and the Australian

Postal Commission (Australia Post) were created from the former Postmaster-General’s

Department as two separate statutory authorities.

Telecommunications Act 1975 gave Telecom the exclusive rights to erect and manage

telecommunications infrastructure in Australia, and required any person who wished to

attach a line, equipment or apparatus to Telecom’s network to first obtain Telecom’s

approval. It also gave Telecom powers to make by-laws setting standards for any

equipment or services attached to its network.

The Overseas Telecommunications Commission (OTC), established in 1946, retained

the monopoly right to provide telecommunications between Australia and other places.

1981 AUSSAT was established mostly to provide broadcasting services, particularly in regional

areas and to specific public agencies. It was largely prevented from competing with

Telstra or OTC in the provision of telecommunications services.

1989 The Telecommunications Act 1989 allows competition in the provision of services

attached to but outside of the networks — customer premises equipment (CPE),

value-added services (VAS) and private network services (PNS).

AUSTEL was established as the main telecommunications industry regulator, with the

ACCC’s predecessor, the Trade Practices Commission, responsible for some competition

regulation functions, particularly in relation to misleading and deceptive conduct.

1991 Telecom and OTC were merged to form the Australian Overseas Telecommunications

Commission (AOTC). AOTC subsequently started trading as Telstra.

Limited competition in carriage services began under the Telecommunications Act 1991.

Competition was centred between Telstra and Optus. Resale competition was also

allowed but was limited. AUSTEL was responsible for regulating competition between

the carriers and other functions.

Optus bids successfully for licence to provide fixed and mobile calls, Vodafone to

provide mobile calls. AUSSAT was sold to Optus.

1993 The Telecommunications Industry Ombudsman (TIO) was established as an industry-

funded consumer complaints resolution scheme.

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C O M P E T I T I O N I N A U S T R A L I A ’ S T E L E C O M M U N I C A T I O N S I N D U S T R Y— A T I M E L I N E

1995

200019991998

1997

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1995 The ACCC was established through the merger of the former Trade Practices

Commission and Prices Surveillance Authority.

1997 Full competition in telecommunications carriage services was introduced by the

Telecommunications Act 1997. AAPT, Primus Telecommunications, Telstra Multimedia

and Optus Vision gained the first new carrier licences.

The Trade Practices Act 1974 was amended to introduce telecommunications-specific

provisions to safeguard competitive conduct (part XIB) and provide for industry-wide

network access by competing businesses (part XIC).

The Australian Communications Authority was established by the merger of AUSTEL

and the Spectrum Management Agency (SMA) to regulate technical and consumer issues

and manage radio communications.

One-third of Telstra was privatised (with a further one-sixth privatised in 1999).

A range of telecommunications services is deemed to be declared under part XIC of the

Trade Practices Act, requiring Telstra and other carriers to negotiate access agreements on

reasonable commercial terms with other carriers when requested to do so, or submit to

ACCC arbitration.

1998 The ACCC issued its first competition notice against Telstra for alleged anti-competitive

conduct in provision of services to Internet access providers.

1999 The Trade Practices Act 1974 was amended to strengthen telecommunications-specific

anti-competitive conduct provisions in part XIB.

2000 Sixty-three carrier licences were awarded by 15 December.

The ACCC rejected Telstra’s proposed undertakings for access to its fixed network, on

both price and non-price grounds.

The ACCC issued final determinations in a number of access disputes.

The Productivity Commission commenced its review of the telecommunications-specific

competition regulation.

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ObjectiveThe objective of the Trade Practices Act 1974

is to enhance the welfare of all Australians by

promoting competition and fair trading and

by providing safeguards for consumers. Its

major parts deal with access to services, anti-

competitive practices, consumer protection, price

exploitation under the New Tax System, and

authorisation and notification of otherwise

anti-competitive conduct. There are also some

industry-specific parts.

Access to servicesPart IIIA of the Act sets out a general framework

for businesses to obtain access to the services of

essential infrastructure facilities. These include

gas pipelines, electricity transmission wires, rail

tracks and some airport facilities.

Anti-competitive practicesPart IV prohibits a range of anti-competitive

conduct including anti-competitive agreements,

primary and secondary boycotts, resale price

maintenance, exclusive dealing, third line

forcing, misuse of market power and anti-

competitive mergers or acquisitions.

Consumer protection and fairtradingParts IVA, IVB, V and VA contain the Act’s

consumer protection and fair trading provisions.

These prohibit unconscionable conduct (taking

commercial advantage of another’s special

disadvantage or disability) and misleading and

deceptive advertising and marketing practices.

They also provide consumers with basic warranty

rights and establish compulsory consumer

product safety standards and liabilities for

manufacturers and importers of defective goods.

Other provisions allow prescribed industry codes

of practice to be legally enforced.

All States and Territories have fair trading and

consumer protection laws that largely mirror

Trade Practices Act provisions. The ACCC

concentrates on conduct that is industry-wide

and conduct that affects large numbers of

consumers.

The New Tax System (GST) The New Tax System affected the prices of goods

and services in virtually all industries. A phase-in

period applies from July 1999 to 30 June 2002

The Trade Practices Act

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and the Government has given the ACCC

the responsibility of ensuring that no price

exploitation of consumers occurs during

that time.

Authorisation and notificationPart VII gives the ACCC powers to authorise

(allow) certain otherwise unlawful anti-

competitive practices. The ACCC must

give public notice of all applications for

authorisation, make its own market inquiries

and allow for public comment. Applications

may only be authorised when the ACCC is

satisfied that the public will receive benefits

outweighing the anti-competitive costs.

Businesses have the option of notifying the

ACCC about exclusive dealing conduct.

The ACCC accepts notifications without

conducting investigations unless circumstances

warrant it. Notification gives immunity from

court action until the ACCC decides to remove

that protection.

Industry-specific provisionsPart X allows the ACCC to give limited

exemptions from some part IV anti-competitive

conduct provisions in relation to international

liner cargo shipping.

Parts XIB and XIC set out specific provisions for

anti-competitive conduct and access to essential

facilities in the telecommunications industry.

EnforcementThe Federal Court and State and Territory

courts hear trade practices matters. The ACCC,

businesses or individuals can take court action.

Class actions can be taken over parts IVA, IVB, V

and VA contraventions.

The maximum penalties for breaches of the anti-

competitive conduct provisions are $10 million

for companies and $500 000 for individuals.

Maximum penalties for breaches of the

consumer protection provisions are $200 000

for companies and $40 000 for individuals.

Enforceable undertakingsThe Act allows the ACCC to accept court

enforceable undertakings in the exercise of

its powers.

The Australian CompetitionTribunalThe Australian Competition Tribunal is a review

body whose President and Deputy President

must be Federal Court judges. The tribunal’s

functions include hearing appeals on decisions

made by the Minister or the ACCC in certain

access matters, and reviewing ACCC

authorisation and notification decisions.

The ACCC publishes a wide range of publications on the TradePractices Act 1974, on specific parts and key sections of the Actand on its application in specific industries and occupations.These are available from the ACCC offices and website.

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Access to network servicesWhen limited competition in carriage services

was introduced in 1991, the Telecommunications

Act 1991 required Telstra and Optus (as fixed

and mobile carriers) and Vodafone (as a mobile

carrier) to negotiate access to each other’s

network services through ‘access agreements’.

When they could not agree, the carriers had

to submit to arbitration by the then regulator,

AUSTEL.

Industry-wide access regulation is essential

to competition in telecommunications. For

example, all carriers need access to Telstra’s

customer access network (CAN) — the

10 million lines directly connecting each

customer to Telstra’s nearest local telephone

exchange. Without this, Telstra’s competitors

could not compete in the local call market or in

related markets, such as those for long-distance,

international and mobile to fixed calls.

When open competition in telecommunications

services was introduced in 1997, the ACCC

Industry-wideregulation

became responsible for access regulation. A new

part XIC was inserted into the Trade Practices Act,

allowing the ACCC to ‘declare’ certain services.

This meant the owners or operators providing

those services had to provide other carriers with

access to them on reasonable commercial terms.

As Telstra competes in all markets that rely on

access to the CAN, it has a commercial incentive

to impose access terms and conditions that

disadvantage its rivals. Part XIC addresses

this problem by requiring that the terms and

conditions of access be reasonable. If an access

seeker believes that conditions imposed by a

carrier are not reasonable, it can notify the ACCC

of an access dispute and request the ACCC to

arbitrate.

A carrier may also provide a proposed access

undertaking to the ACCC, setting out the generic

terms and conditions upon which it proposes

to allow access to nominated services. Once

accepted, the ACCC may only arbitrate any

subsequent access disputes within the terms

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of that undertaking. So far, no access

undertakings have been approved by the ACCC.

ObjectivesThe ACCC must exercise its access functions —

declaration, dispute settlement and assessment of

access undertakings, as well as ancillary functions

such as determining pricing principles to be

applied in access disputes — to promote the

long-term interests of end users. To assess

whether a particular decision will do so, the

ACCC must consider the following — whether it

will promote competition in telecommunications

markets, achieve ‘any-to-any connectivity’

(so different networks’ end users can

communicate) and encourage the economically

efficient use of and investment in infrastructure

supplying telecommunications services.

The ACCC must act reasonably in its

deliberations and determinations. It must take

into account the legitimate interests of businesses

providing and seeking access to services, the

direct costs of providing them and the safe,

reliable and economically efficient operation

of services, networks or facilities.

DeclarationServices, rather than the facilities used to provide

them, are declared. Once the ACCC declares

certain services, the owners must provide access

to other businesses on reasonable commercial

terms. This recognises that a facility, such as the

customer access network, can be used to provide

more than one service, and that it may be in the

best interest of end users for only some to be

declared.

Initially, to provide continuity between the

former restricted access regime and the new open

access system, the ACCC was required to deem

certain services to be declared. This enabled

some of the existing carriers’ access arrangements

to continue (and be extended to new carriers and

service providers, such as call resellers), while the

ACCC inquired into which services should be

declared under the new legislation.

During the transition the ACCC determined

prices that new carriers and carriage service

providers would pay for interconnection with

Telstra’s network. It set them at a level equivalent

to those Telstra charged Optus and Vodafone.

As a result, several carriage service providers,

such as AAPT, World Exchange and GlobalOne

benefited immediately from price reductions of

around 35 per cent.

The ACCC may also declare a service on the

recommendation of the Telecommunications

Access Forum, an industry co-regulatory body,

or after conducting a public inquiry (see p. 13).

Any carrier that provides a declared service to

itself must, if there is spare capacity, provide

that service to other carriers on reasonable

commercial terms.

Standard access obligations A provider of a declared service must comply

with the standard access obligations, which

create an immediate right of access for access

seekers. These address issues such as technical

and operational standards, fault detection and

rectification, accounts and access, where

necessary, to services provided by specific

customer equipment, such as pay television

set-top boxes.

If a provider fails to meet any of these

obligations, the ACCC or any other person

whose interests are affected may apply to the

Federal Court for orders for compliance and

damages. The standard access obligations do

not apply if the provider does not have spare

capacity, or if their imposition would deprive

a business of existing rights.

If it is satisfied that it would be in the end users’

long-term interests, the ACCC may exempt

service providers from any of the standard access

obligations. No exemptions had been granted

at the time of publication.

Access terms and conditions The standard access obligations do not specify

either the price or many other key terms and

conditions for the supply of a declared service.

These may be determined by three means.

The first, and most common, is commercial

negotiation.

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Alternatively, an access provider may offer to the

ACCC an access undertaking specifying the terms

and conditions upon which it will provide access

to a declared service. The ACCC may only accept

an undertaking if its terms promote the long-

term interests of end users. If accepted, access

undertakings are enforceable in the Federal

Court and any subsequent arbitrations of access

disputes must be determined within their terms.

Finally, where negotiations have failed and no

relevant undertaking is in place, either party may

notify the ACCC of an access dispute and request

arbitration.

Access undertakings So far, no access undertakings have been

approved by the ACCC.

Telstra offered four access undertakings in 1997:

two for its public switched telephone network

(PSTN), the fixed network to which 98 per cent

of Australian end users are connected, and one

for each of its mobile networks (AMPS and

GSM).

All were rejected on grounds that the proposed

non-price terms and conditions allowed Telstra

an unreasonable amount of discretion over how,

to whom and when access would be provided.

The ACCC commissioned two international

consultancies to examine the PSTN proposed

prices. A further access undertaking for PSTN

services was rejected in 1999 because the prices

it contained were unreasonable.

Access disputes The ACCC has been notified of over 40 access

disputes, involving nearly all of the declared

services. A number were resolved before the

arbitration began and the notification was

subsequently withdrawn.

Most disputes were notified by carriers unable

to reach price agreements with Telstra. As C&W

Optus, Vodafone and the new entrants continue

to roll out their own networks, there has been a

corresponding increase in disputes notified by

Telstra.

Arbitrations are conducted in private and the

ACCC does not comment publicly other than

to announce that a dispute has been notified,

withdrawn or determined. In some cases,

notification has led the parties to reach

agreement before going to arbitration.

Two disputes, notified by AAPT and Primus

against Telstra, were finalised in September

2000. Telstra has appealed the ACCC’s

determinations to the Australian Competition

Tribunal.

Pricing principlesThe ACCC issues access pricing principles to

assist the industry with commercial negotiations,

and to indicate the approach it intends to take in

arbitrating access disputes and assessing access

undertakings.

The first pricing principles guide was released in

July 1997, and subsequent guides have been

published for specific services including PSTN

originating and terminating services, local

carriage service, the unconditioned local loop

service, non-dominant fixed line networks and

GSM termination.

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Industry co-regulation — theTelecommunications AccessForumThe Trade Practices Act encourages commercial

negotiation by saying the ACCC cannot arbitrate

access disputes until the parties have tried to

reach agreement themselves. When necessary,

while parties are negotiating, the ACCC may give

directions about access terms and conditions.

The Act also encourages self-regulation through

an industry body, the Telecommunications Access

Forum (TAF). The TAF may recommend to the

ACCC access declarations and industry-wide

codes of practice over technical, operational and

consumer issues.

In 1998 the Australian Communications Access

Forum Inc. (ACAF), which comprises carriers,

content providers, resellers, Internet and other

carriage service providers, became the TAF. The

ACCC subsequently agreed not to commence a

declaration inquiry into a service before the TAF

had indicated that it could not reach consensus.

The TAF had been unable to reach consensus

over any proposed declarations at the time of

publication, and all service declarations have

been made either under ACCC’s transitional

deeming powers or after a public inquiry.

The ACCC may not act on a TAF

recommendation unless satisfied that

representatives of users and consumers have

been given an opportunity to comment on

the proposal.

The TelecommunicationsAccess Code The TAF was also responsible for preparing a

draft Telecommunications Access Code, which

sets out model access terms and conditions from

which access providers and seekers can negotiate.

This helps the industry by removing the need for

each access seeker to develop its own proposals.

The code only binds those parties who agree

to it.

The code was approved in 1998 when the ACCC

determined that its terms were reasonable and

consistent with the standard access obligations

imposed by the Trade Practices Act. The ACCC

retains power to amend the code.

Access undertakings, which are consistent with

the code, will be fast-tracked for approval by the

ACCC. Undertakings that are not consistent

require more detailed consideration to ensure

they meet the requirements of the Trade

Practices Act.

Declaration inquiries The ACCC may conduct inquiries into

declarations (see p. 11). Inquiries are public

unless they involve only a minor variation to

an existing declaration. The ACCC publishes a

discussion paper and draft determination, with

opportunities for public submissions at both

stages, and hearings may be held. In many

cases, papers on technical and pricing issues

are published to probe those matters further,

with opportunities for public comment.

A service may only be declared if it is in the long-

term interest of end users. Market and industry

analyses determine the likely impact of

declaration on competition, and how to balance

the benefits of declaring access against the need

to provide incentives for providers to invest in

their own infrastructure. The ACCC must assess

the technical and operational requirements that

would follow from declaration, and the service

definition to be applied.

The ACCC also considers the pricing principles

necessary to ensure that all access seekers make a

reasonable contribution to the costs of providing

infrastructure. It must take into account any

ministerial pricing guideline, such as establishing

the price cap for some services, and the universal

service obligation to provide untimed local calls

and parity in rural and urban local call prices.

Declared servicesThe ACCC has declared access to 13 tele-

communications services supplied by fixed and

mobile networks to date. This includes those

services that were deemed in June 1997 as a

transitional measure.

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The most important are listed below.

Public switched telephone networks (PSTN)— services provided by the fixed networks, of

which Telstra’s is by far the largest, allowing voice

and voice-speed data calls to be carried from

customers’ premises to local, trunk and inter-

exchange switches. This service is used most

extensively to allow calls originating and

terminating on Telstra’s network to be carried

on other carriers’ long-distance networks.

Local telecommunications services — The

ACCC has declared three different local

telecommunications services: local call resale,

local interconnection and the local loop.

• Local call resale — requires providers of local

calls (mainly Telstra) to sell them wholesale

to service providers, who resell to their

customers.

• Local interconnection — allows carriage

service providers to connect directly to their

competitors’ local exchanges. Because it

reduces competitors’ reliance on Telstra’s

switching and transmission services, it lowers

their input costs and puts downward pressure

on prices.

• Local loop access — allows service providers

to use their own customer premises

equipment on Telstra’s copper wire network,

enabling new technologies (such as ‘xDSL’

digital compression) to be used for high

speed, high bandwidth, data services.

Local call resale and local interconnection are

alternative but complementary ways of providing

competition in the local call market. Local loop

access require greater establishment and

investment costs. Because local call resale allows

new entrants to establish a customer base and

revenue source, it can be a stepping stone

towards investing to compete in the other,

more facilities-based services.

Integrated services digital network (ISDN) —

a service allowing voice and data information to

be carried through standard copper telephone

wires at high speed. Small businesses and other

organisations increasingly use it for cost effective

and efficient electronic commerce, sound and

video transmission and Internet services.

Digital data access services (DDAS) — also

enables high speed, high quality data carriage,

such as EFTPOS and ATM data transmission,

Internet, remote local area networks, video on

demand and interactive multimedia applications.

DDAS is used by large organisations, such as

retailers, banks, insurance companies and

governments and is one of the fastest growing

sectors of the telecommunications market.

Inter-city and inter-capital transmission —

services allowing the carriage of high volume

voice and digital data between major population

centres. The declaration excluded links between

Sydney and Melbourne where the ACCC

considered that new facilities, in addition to

those provided by Telstra and C&W Optus,

would provide sufficient competition to generate

efficient pricing.

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Domestic global system for mobiles (GSM)— services provided by the standard digital

cellular network, enabling calls originating on

one GSM network to be carried and/or to

terminate on any other GSM or PSTN network.

Broadcasting carriage — services delivered by

lines, including optic fibre and coaxial cable,

primarily for pay television services. Analogue,

but not digital services, were declared.

Services not declared Some ACCC inquiries have shown declaration to

be unnecessary, because the relevant market was

already competitive or was likely to become so in

the near future.

International PSTN services — carries

international direct dial (IDD) calls from

international exchanges to numbers outside of

Australia. It was not declared because there are a

number of Australian and international carriers

with whom carriers could negotiate competitive

terms and conditions.

Long-distance and international componentsof mobile calls — the ACCC decided that

declaration was unnecessary. It was unlikely to

result in more vigorous competition than would

be provided by the anticipated entry of three or

four additional mobile carriers.

Several other services were not declared after

ACCC inquiries determined that declaration

would not be in the long-term interests of end

users.

Consumer benefits Price reductions have followed closely on

the introduction of competition in

telecommunications markets. The biggest real

term declines have been for national long-

distance and international calls, with Telstra’s

average prices (excluding discounts) falling by

14 per cent and 61 per cent respectively between

June 1995 and June 1999.

Local call prices started to fall soon after the

ACCC’s declaration of local call services, first

from 25c to 22c, then to 18c and below. Further

price reductions are likely in 2001.

Local call competition will also produce benefits

in other markets. Consumers will be more likely

to change provider in pursuit of lower prices

when they are able to pay for all their

telecommunications services — local, national

long-distance and international — on a single

account. Together with the introduction of local

number portability, these developments will

place greater pressure on service providers to

reduce costs and improve services.

Price reductions have also occurred in mobile

call services. Competition initially focused on

reducing handset prices and access charges

to encourage consumers to enter the market.

More recently, call charges have started to fall

and are expected to further decline as new

carriers are licensed in 2001.

Reduced costs and increased demand have

resulted in the sector expanding at about twice

the rate of GDP growth in recent years. This led

to increases in employment, exports and research

and development expenditure and underpinned

growth in the economy more generally.

Additional benefits have come from the

development of new services and service

packages, and from improvements in quality

in a number of areas.

Telecommunications publications available from the ACCC website and offices.

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When open competition was introduced in 1997

it was clear that Telstra still had considerable

market power despite the limited competition

that had been introduced in 1991 with the

market entry of Optus and Vodafone.

One of the key reasons for Telstra’s continued

market power was its control of the essential

facilities aspect of the telecommunications

network — the local loop. It was recognised that

the access regime mechanisms would take some

time to reduce the market power arising from

control of the local loop and for significant

market entry to occur.

There are three main reasons for Telstra’s

market power:

• Telstra’s share of the market;

• customer loyalty; and

• technology and industry complexity.

Telstra’s share of the market Telstra has a significant share of most

telecommunications markets, at both the

wholesale and retail levels. At the end of 2000

Telstra:

• had almost exclusive control of the local loop,

to which its competitors need access to

connect to customers;

• supplied approximately 95 per cent of local

call services;

• had approximately 60 per cent of the long-

distance and international voice market;

• was the largest Internet service provider; and

• served around 50 per cent of mobile

subscribers.

Customer loyaltyAs Australia’s longest established

telecommunications provider and a former

monopolist, Telstra enjoys strong customer

loyalty and brand recognition. These factors

mean that some customers are likely to stay with

Telstra, even when competitors offer lower prices.

It may take some time before competitors can

overcome Telstra’s head start.

Competitive safeguards

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Technology and industrycomplexity Telecommunications is a highly complex

industry, in which technology is developing

continually. Conduct such as bundling or

exclusive dealing that at times may appear

anti-competitive, may in fact be pro-competitive

or necessary to meet technical requirements.

For example, a carrier could argue that certain

terms and conditions were required for technical

reasons. The ACCC may be required to

determine whether this is actually the case, or

whether particular provisions are directed at

maintaining or increasing market power.

Telecommunications-specificcompetition provisionsCompetition noticesIn light of Telstra’s market power, the

Government introduced telecommunications-

specific competition safeguard rules in the 1997

reforms. The ACCC is able to issue a competition

notice, stating that the specified carrier or

carriage service provider has breached or is

breaching the competition rule. The competition

rule contained in the Trade Practices Act simply

states that a carrier or carriage service provider

must not engage in anti-competitive conduct.

A competition notice is enforceable in the

Federal Court as prima facie evidence of the

matters alleged. Therefore, the recipient of the

notice bears the burden of proving that its

conduct was not anti-competitive. If the court

finds that anti-competitive conduct occurred, the

ACCC can seek penalties of up to $10 million.

The Act also provides for additional penalties of

$1 million for every day the conduct continues.

Third parties are also able to seek damages for

anti-competitive conduct after the ACCC has

issued a competition notice and while the notice

is still in force.

The competition notice regime provides the

ACCC with a relatively swift mechanism to

respond to anti-competitive behaviour.

Information gathering and pricemonitoringGiven the complexity of the services provided,

and Telstra’s size and ability to anti-competitively

cross-subsidise services, the ACCC has additional

information-gathering powers, such as the power

to require that Telstra provide information on

call and other charges to the ACCC. These

powers also assist the ACCC to monitor

compliance with access rules, such as access

price determinations. The ACCC has used its

information-gathering powers to establish a new

regulatory accounting separation framework and

in relation to particular investigations.

Other powersThe ACCC also has powers to seek injunctions

from the Federal Court to stop anti-competitive

conduct by a carrier or carriage service provider

and to make orders exempting specified conduct

from the scope of the definition of anti-

competitive conduct.

Competition noticesBy the end of 2000 the ACCC had issued five

competition notices. These were aimed at

stopping what the ACCC considered to be

Telstra’s anti-competitive conduct in its customer

transfer or commercial churn practices and in the

charging rules it imposed on competing Internet

access providers. The ACCC also raised with

Telstra the possibility of issuing a notice over its

withdrawal of ISDN services. All matters were

resolved.

ACCC procedures and timeframesThe ACCC has to determine whether the Act has

been contravened and whether it should institute

proceedings within 30 days of the initial

complaint. It will then inform the complainant

and interested parties of its decision. The ACCC

then decides whether it has a reason to believe

there is a contravention of the Act within a

further three months. If it has, the ACCC then

issues its competition notice within a further

30 days.

The ACCC’s Telecommunications — Competition notice guideline,Anti-competitive conduct in telecommunications markets and otherpublications on its telecommunications competitive safeguards regimeare available from the ACCC offices and website.

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Record-keepingThe Trade Practices Act gives the ACCC powers to

require carriers and carriage service providers to

keep both financial and non-financial records in

a form determined by the ACCC and to prepare

and provide regular reports based on these

records.

These powers assist the ACCC to monitor

compliance with competition, access and other

rules, such as those regulating international

dealings and Telstra’s price cap.

The Telecommunications Industry Regulatory

Accounting Framework provides the financial

record-keeping rules for the industry and sets

out:

• the services to be reported on, including the

separate reporting of wholesale (internal and

external) and retail services;

• details of the information to be provided for

each service, including a detailed description

of revenues, costs and capital associated

with each service as well as the format this

information should be provided in;

• principles to be applied by carriers in

developing detailed allocation methodologies

in compliance with the record-keeping

requirement; and

• an audit process to monitor compliance

with the record-keeping and substantial

competition and access rules.

Tariff filingTelstra and other carriers and carriage service

providers may be required to file all charges for

basic carriage services with the ACCC. The ACCC

may also issue tariff-filing directions requiring

information about present and future tariffs.

Record-keepingtariff filing

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Retail telecommunications prices are controlled

in a variety of ways. Under the Telstra Corporation

Act 1991 and the Telecommunications Act 1997, all

carriers and carriage service providers offering a

standard telephone service for local calls must

offer their customers the option of untimed local

voice calls. Residential customers and charities

must also be given the option of untimed local

calls. Local call prices from fixed telephones are

capped at 22c and from payphones at 40c.

Telstra’s price controlsThe Telstra Act imposes price caps on many of

Telstra’s products and services. The price controls

operate at two levels.

First, a range (or basket) of services are subject

to a price cap, using what is known as CPI–X

regulation. Average price increases for services

within the basket are limited to increases in the

consumer price index (CPI), less ‘X’, which is a

percentage determined periodically by the

Price monitoring andcompliance with pricecontrols

Minister. CPI–X regulation guarantees that prices

will fall in real terms each year.

Services in Telstra’s price cap basket include:

• telephone connection;

• labour charges;

• annual service charges;

• local standard and pensioner calls;

• community and pastoral calls;

• STD calls;

• international direct dial calls and the per

minute component of international operator

assisted calls;

• leased line services;

• direct dial calls from a fixed telephone to a

cellular mobile service located in Australia;

and

• the activation, access and call charges for

cellular mobile telephone services.

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Telstra may rebalance prices for services within

the basket above the cap level to increase prices

for some services or for different classes of

customers, provided that there are offsetting

reductions for other services in the basket, and

overall revenue-weighted prices remain within

the cap.

Second, certain services within the basket are

subject to individual price caps, currently set at

CPI–1 per cent. These services are residential

telephone connections, customer access (fixed

and mobile) and long-distance and international

calls.

The ACCC is responsible for calculating a

revenue weighting for each service and within

each basket, and the weighting for discount

plans.

The ACCC is required to monitor Telstra’s

compliance with the price controls and provide

an annual report to the Government.

The Telecommunications Act also gives the

Government power to declare that price increases

for certain services must be notified to the ACCC.

On the ACCC’s advice, price increases may be

disallowed by the Minister for Communications.

These provisions currently apply to pay

telephones (capped at 40c) and to directory

assistance services (capped at zero).

Review of the price controlsIn 2000 the Government directed the ACCC to

undertake an inquiry into whether Telstra’s retail

price controls should continue after the expiry of

the current arrangements on 30 June 2001. If the

ACCC recommends that price controls should

continue, it must also recommend the form these

should take.

A series of public hearings were held in capital

cities and major regional centres around

Australia in late 2000 and a final report was

provided to the Minister in February 2001.

Universal service obligationsIn addition to price controls, equitable access to

telephone services is also provided though the

Telecommunications Act’s universal service

obligation (USO). This requires that the standard

telephone service (presently defined as voice

service), services for the disabled, public

payphones and certain other prescribed services

are reasonably accessible to all people in

Australia, regardless of where they reside or carry

on business. The cost of providing the USO is

calculated annually by the Government, and all

carriers are required to contribute to USO costs,

in proportion to their revenues, as condition of

their licence. Carriers tender to provide the USO

in different regions of Australia. The USO

arrangements are administered by the ACA.

Price monitoring The ACCC is required to monitor Australian

telecommunications prices and provide annual

reports to the Government. These reports survey

prices charged to consumers for connection, line

rental and local, community, pastoral, national

long-distance and international calls. They also

examine prices for operator-assisted calls and

mobile–fixed, fixed–mobile and mobile–mobile

services. Telstra’s compliance with its price

controls and each universal service provider’s

compliance with the Telecommunications Act

are also monitored.

The most recent report, published in May 2000,

included a survey of prices over the period 1995

to 1999. It showed that in real terms (that is, net

of inflation):

• the average price of a local call declined by

around 9 per cent;

• the average per minute charge for a Telstra

national long-distance call declined by 37 per

cent;

• the average per minute charge for a Telstra

international call declined by 54 per cent; and

• the average price of Telstra and C&W Optus

fixed to mobile calls declined by around 8 per

cent and 4 per cent, respectively.

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The complexity of pricing plans means that the

ACCC could not produce an authoritative report

on mobile service charges. The study, however,

estimated that Telstra and C&W Optus prices

declined by around 10 per cent in nominal terms

between 1997 and 1999. Future editions of the

report will include more comprehensive

information on mobile phone charges.

The ACCC expects that call prices will continue

to fall as competitive pressures and demand for

services grow.

Telecommunication charges in Australia and reports on the ACCC’sreview of Telstra’s price control arrangements are available from theACCC website and offices.

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Number portabilityNumber portability allows customers to change

their telephone service provider and retain their

telephone number. Implementing number

portability is important for competition because

it allows customers to change service provider

without the expense of changing stationery and

advising others of a new telephone number.

It encourages consumers to shop around for

better telephone service contracts and therefore

increases pressure on service providers to reduce

costs and improve services.

The Telecommunications ActThe ACCC has powers under the

Telecommunications Act to direct the Australian

Communications Authority (ACA) to require

carriers and carriage service providers to provide

number portability. In September 1997 the

ACCC issued a notice requiring the ACA to

mandate limited local number portability (LNP)

by May 1998 and full LNP by 1 January 2000.

In September 1999 the ACCC issued directions

concerning mobile number portability (MNP).

MNP should be implemented in September

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The Telecommunications Act also gives the

ACCC power to establish pricing principles for

service providers when they charge customers

and other service providers for services associated

with implementing number portability. Pricing

principles were issued for LNP in 1999 and

(in draft form) for MNP in February 2000.

They require each carrier to bear the full costs,

excluding transfer costs, of providing number

portability.

Pre-selectionThe ACA may require carriers and carriage

service providers to provide pre-selection in

favour of other carriage service providers.

This allows customers to dial a certain number

to select a particular carrier for a particular

service (including national long-distance

or international calls as well as fixed to

mobile calls).

The ACA must consult the ACCC before making

a determination requiring a carrier or carriage

service provider to provide pre-selection.

Electronic addressingThe Telecommunications Act regulates electronic

addressing and empowers the ACA to determine

that a specified person or association is the

declared manager of electronic addressing for

specified kinds of carriage service.

The ACCC may issue directions to the ACA if it

believes that an ACA determination would be

likely to have a bearing on competition.

ACCC directions on technicalstandardsThe ACCC is responsible for directing the ACA

to make technical standards for network

interconnection.

International rules of conductThe Telecommunications Act allows the

Government to make rules preventing

international telecommunications operators

outside Australia from using their market power

to the detriment of telecommunications

operators in Australia.

Under these rules the ACCC may impose

requirements, prohibitions or restrictions on

carriers or carriage service providers in their

dealings with international telecommunications

operators.

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Mergers and acquisitions that would have the

effect of substantially lessening competition in

any market are prohibited by s. 50 of the Trade

Practices Act.

The Act requires the ACCC to assess proposed

acquisitions that may infringe s. 50 against

criteria that include the nature of the relevant

market, industry concentration, import

competition and barriers to potential new

entrants joining the market.

The ACCC may approve an application to

authorise an anti-competitive merger if it is

satisfied that there are sufficient public benefits,

such as increased export generation or import

replacement.

The Act also allows the ACCC to approve mergers

subject to the proposed acquirer giving court

enforceable undertakings on matters such as

subsequent divestment.

Parties to a merger or acquisition that could

have s. 50 implications frequently request the

ACCC to undertake a confidential preliminary

assessment. Cases may also come to the ACCC’s

attention through media reports, the Foreign

Investment Review Board or complaints from

the public.

Where its initial analysis suggests grounds for

concern, the ACCC will make market inquiries

to assess the merger or acquisition’s likely impact

on the relevant market, subject to observing any

applicable confidentiality constraints.

Cable & Wireless Optus andAAPTIn 1999 Cable & Wireless Optus Pty Ltd

(C&W Optus), Australia’s second largest carrier,

announced its intention to bid on the third

largest carrier, AAPT Ltd. Before C&W Optus put

a formal offer to shareholders, the ACCC began

an investigation of its potential impact on

competition in telecommunications markets.

After commissioning a consultant’s report,

obtaining economic and legal advice and

conducting market inquiries, the ACCC advised

C&W Optus that it had serious concerns that the

acquisition would have the effect or likely effect

of substantially lessening competition in a

number of markets. These included upstream

markets, such as transmission lines, switches,

points of interconnections and billing and

customer support, and downstream markets

including Internet, data and local call access.

Mergers andacquisitions

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Under the Trade Practices Act the ACCC is

required to consider any proposed merger or

acquisition that would remove a ‘vigorous and

effective competitor’ from a market. The ACCC

found that AAPT was a very significant

competitor in telecommunications, and had

often been the price leader.

The Act also places stress on the degree of vertical

integration in an industry, and the extent to

which a merger may affect other businesses in

upstream and downstream markets. Since AAPT

was one of only three national carriers at the

time, its removal as a competitor to Telstra and

C&W Optus would have had a major impact on

retail or downstream businesses that rely on

competition between the carriers to restrain

prices.

Another factor in the ACCC’s considerations over

proposed mergers is the extent to which there

may be barriers to other businesses seeking entry

to the relevant market. The ACCC considered

that, while there were an increasing number of

businesses offering retail telecommunications

services, there were considerable barriers to a

new entrant wishing to establish a national

network capable of supplying wholesale

telecommunications services. These included

delays in negotiating access arrangements, access

to radiofrequency spectrum, initial cost

disadvantages while developing economies of

scale and scope, brand loyalty and customer

inertia and access to market and customer

information.

The ACCC concluded that the merger would

likely have resulted in Australia reverting to a

duopoly in the wholesale telecommunications

market, with a significant loss of competition

and resulting detriments to end users. C&W

Optus was advised of this view in May 1999

and withdrew its offer in the same month.

OzEmail and TelstraIn January 2000 Telstra announced that it had

entered an agreement with OzEmail, owned by

MCI WorldCom subsidiary UUNET, to purchase

its residential customer base for more than

$300 million. At the time Telstra’s Big Pond was

Australia’s largest ISP with around 500 000

customers and OzEmail the second largest, with

400 000 customers. C&W Optus came a distant

third at 120 000.

An ACCC investigation determined that the

proposed acquisition would lead to a substantial

lessening of competition. OzEmail is Telstra’s

major competitor and the only one large enough

to compete head-to-head with Telstra. In the

ACCC’s view, OzEmail’s removal as an

independent entity would possibly leave Telstra

without any effective constraint in the market.

The ACCC was also of the view that the high cost

of establishing a large national subscriber base

created a significant barrier to new entry.

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The proposed acquisition would have given

Telstra 40 per cent of the national market for

residential ISP services. This would have been

compounded by the fact that Telstra is a major

provider of infrastructure and wholesale services

to other ISPs. Other concerns centred on the

impact of the proposed acquisition on

competition in related markets, including those

for online content, online advertising and

electronic commerce. The ACCC considered

that Internet markets were in their early stages of

development in Australia and that the emergence

of a dominant Australian ISP could retard

competition and stifle innovation in these

evolving markets.

In February 2000 the ACCC advised Telstra of

its view that the OzEmail bid would be likely to

breach s. 50 of the Trade Practices Act. Telstra

subsequently announced that it would withdraw

from the agreement.

eisa and OzEmail The ACCC decided not to intervene in eisa’s

February 2000 bid to acquire OzEmail, which

it concluded would be unlikely to substantially

lessen competition. The ACCC’s studies indicated

that the acquisition would leave the market with

two large ISPs in terms of active subscriber

numbers, Telstra and eisa/OzEmail, followed by

a number of smaller competitors. Under these

conditions the competitive dynamics in this

industry would be largely unaffected.

Radio spectrumThe Commonwealth Government controls access

to the radio spectrum, allocating different

frequencies to different types of users.

During 1997–98 the Government auctioned

rights to parts of the 800 MHz and 1.8 GHz

bands, with most bidders expected to use them

for GSM digital mobile telephony or wireless

local loop services. Rights were allocated on a

regional basis, and typically let in 10–15MHz

bands. Successful bidders included Telstra,

C&W Optus, Mobile, Vodafone, Hutchison

Telecommunications, AAPT Wireless, Catapult

Communications and AIF Telecommunications.

The ACCC assessed each successful bid before

the rights were finally granted. Although the

existing carriers — Telstra, C&W Optus and

Vodafone — each acquired additional spectrum,

the entry of a number of new carriers meant that

the incumbents’ overall market shares declined.

The ACCC did not object to any of the

acquisitions.

Consumer protection

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Competitive telecommunications markets and

new technologies, such as mobile telephones and

Internet services, have created new challenges for

the ACCC as the national administrator of

consumer protection and fair trading law.

The Trade Practices Act provides a range of

protections for consumers and small businesses,

including prohibition of unconscionable and

misleading and deceptive conduct. It also

provides consumers with basic warranty rights

and establishes compulsory consumer product

safety standards and liabilities for manufacturers

and importers of defective goods.

These provisions are largely mirrored in State

and Territory Fair Trading Acts (and their

equivalents), so the ACCC focuses on industry-

wide conduct and conduct that affects large

numbers of consumers.

Consumer protectionEnforcement Generally, the ACCC takes a tiered approach

to enforcement, beginning with industry-wide

education programs and by encouraging

companies to develop and implement trade

practices compliance programs.

Where education is not effective, the ACCC

may seek court enforceable undertakings and/or

remedial measures such as refunds and corrective

advertising. If investigations indicate that a

business is still breaching the Trade Practices

Act, or where the conduct otherwise warrants,

prosecutions may be launched in the Federal

Court. Individuals and businesses may also take

action for breaches of the Act.

Misleading advertising andunfair contract termsSoon after the introduction of competition into

telecommunications carriage services, the ACCC

began to receive complaints over carriers’ and

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retailers’ misleading advertising and unfair

contract terms. These practices were especially

prevalent in the mobile phone market. The

following are examples of conduct investigated

and enforcement action taken.

• Microsoft Pty Ltd — alleged false or

misleading representations in a promotion

of free Internet access. Undertakings were

received to honour claims for free Internet

access, review procedures for trade practices

vetting of future promotions and to instigate

a more comprehensive trade practices

compliance program for management,

sales and marketing staff (1996).

• Telstra Corporation Ltd — alleged

misleading or deceptive conduct about a

wiring repair plan. Undertakings were given to

stop charging for the plan and refund current

and non-current customers the amount paid

for the plan since 1992. This included placing

advertisements in newspapers asking non-

current customers to contact Telstra for a

refund (1996).

• Optus Vision Pty Ltd — alleged misleading

or deceptive advertising of availability of

Optus local telephony services. At the time

of the advertising campaign, those services

were not available to any significant extent.

Undertakings were given to support industry

guidelines, undertake a corrective information

program with ACCC guidance and refrain

from such false or misleading claims over

the following year (1997).

• AAPT Ltd — alleged misleading conduct in

promotion of ‘Smartchat’ rates. It involved

failure to disclose that rates depended on

the time calls were made (off peak, peak,

economy etc.), limitations on the offer and

that customers must pre-select AAPT to

take advantage of the advertised rates.

Undertakings were given to publish corrective

advertising, refrain from similar conduct,

inform customers of conditions and develop

a trade practices compliance program (1997).

• One.Tel Ltd — variations were made to its

‘0/20’ mobile contracts, which offered a zero

access fee and $20 per month minimum call

charge and to introduce a $12 per month

access fee. Many customers were unaware that

the contract allowed One.Tel to vary the terms

of the contract at its discretion over the

contract period. Undertakings were given to

provide refunds of monthly access fees to

customers signed between September 1996

and May 1997 and to amend the terms of

customer contracts (1997).

• Wavequest Pty Ltd (trading as AliceComputers) and Prebeal Pty Ltd (tradingas Mobile Phones Etc) — misleading

advertisements offered ‘free’ mobile phones.

Consumers were actually required to enter

into 15–18 month contracts with minimum

charges from $336 to $6300 as a condition

of obtaining their ‘free’ mobile phone.

The Federal Court gave affected consumers

the option of cancelling their contracts and

ordered the traders to pay the ACCC’s

costs (1998).

• Signal Communications Pty Ltd andDigital Discount Centre Pty Ltd — alleged

misleading brochure for a ‘Phone Saver Plan

25’ mobile phone package. It did not disclose

certain costs that would be incurred by

consumers, including a condition that

customers pay minimum call costs during

off-peak periods. Undertakings were provided

for all affected customers for a $50 credit,

allowance to exit their contracts without

penalty, retain their handsets without further

payment and a written apology (1999).

Industry advertising code While enforcement can provide appropriate

remedies and penalties, misleading conduct or

unfair trading practices are often best addressed

on an industry-wide basis. During 1997–98

the ACCC worked with the Australian

Communications Industry Forum (ACIF).

They developed ACIF’s Prices Terms and

Conditions Code, which applies the fair trading

and consumer protection standards of the Trade

Practices Act, but with details appropriate to the

telecommunications industry.

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The code’s provisions include requirements for

mobile telephone advertisements to show the

entire cost of the package and not just the

handset’s ‘headline price’. It requires this

information to be displayed in the body of the

advertisement, not in the fine print. Advertisers

also had to give better explanations in

‘comparison’ advertisements for consumers

to make informed choices.

The code came into effect in February 1999.

The ACCC and the Telecommunications Industry

Ombudsman (TIO) are monitoring industry

compliance.

Unauthorised customer transfer— slammingSlamming is the industry term for the

unauthorised transfer of a customer from one

telephone company to another. Businesses profit

from this practice by receiving commissions from

service providers for signing up new customers.

Typically, slamming is carried out by door-to-

door salespeople who mislead consumers into

signing forms that have the effect of permanently

changing their telephone company. In some

cases consumers believe that their signature is

required for a survey. In others they may believe

that they are being provided with an over-ride

code, allowing them to select another service

provider when discounts are offered. Customers

only realise that they have changed providers

when they receive a bill.

In 1998 the ACCC took successful Federal Court

proceedings against Austcomm Pty Ltd, two of

its senior executives and four marketing agents.

It alleged that the company had engaged in

unconscionable conduct by signing up a person

with special disabilities who could not read

the contract, and rendered accounts without a

reasonable cause to believe that it had a right to

payment.

One.Tel and Primus In July 2000, following the receipt of many

complaints about slamming from consumers

throughout Australia, the ACCC formally

investigated the customer transfer procedures of

several telephone companies. The vast majority

of complaints, received by both the ACCC and

the Telecommunications Industry Ombudsman,

were about the transfer of telephone services to

either One.Tel or Primus without the consent or

sometimes even the knowledge of the account

holder.

The ACCC’s investigations revealed that the

door-to-door sellers used by One.Tel and Primus

at times gained signatures of consumers who

clearly could not ascertain the effect or meaning

of what they were signing. This extended to

taking unfair advantage of elderly and infirm

members of the community and those with

limited understanding of English. The ACCC’s

investigations and the records of the telephone

companies clearly showed that the illegal

activities of the door-to-door and telephone

sales agents occurred within weeks of them being

contracted by One.Tel and Primus. Despite the

continuation of clearly unacceptable levels of

complaints, the companies stopped using the

agents only after intervention by the ACCC.

In December 2000 One.Tel and Primus gave

undertakings to the ACCC and consented to

Federal Court orders that they would change

the way they sold telephone services.

Each company undertook to pay up to $500 000

toward a public awareness campaign aimed at

stamping out unauthorised customer transfers

or slamming. The ACCC acknowledged that the

door-to-door sellers and tele-marketing agencies

were directly involved in gaining new customers.

It considered that it was nevertheless the

responsibility of the telecommunications

companies to ensure their representatives were

adequately supervised to avoid liability under

the Act.

Telecommunications ‘auditors’Companies representing themselves as being able

to ‘audit’ customers’ telephone bills have also

been investigated by the ACCC for breaches

of consumer protection and fair trading law.

In 1998 the Federal Court made interim orders

restraining Billbusters Pty Ltd from representing

that it performs audits on accounts or invoices

from Telstra, and from representing that the

ACCC has the power to prevent Telstra

disconnecting its customers’ telephones.

The orders also prevented the company from

using or dealing in any manner whatsoever

with moneys received from customers for the

purposes of paying Telstra accounts or invoices.

Internet pyramid selling andscams The Internet has become a new vehicle for

various types of scams, including pyramid selling

and referral selling schemes. Pyramid selling

differs from legitimate multi-level marketing

schemes by rewarding participants for

introducing new participants, rather than for

genuine product sales. The Trade Practices

Act provides for fines of up to $200 000 for

companies and $40 000 for individuals

promoting or participating in such schemes.

Other penalties include injunctions, damages,

restitution of moneys received, corrective

advertising and legal costs.

Unsolicited emails (spam) are a common vehicle

for pyramid schemes and other Internet frauds.

The ACCC operates a ‘slam a scam’ program

through its offices and website to encourage

reporting of such conduct. It also participates

with consumer law enforcement agencies from

29 countries in the International Marketing

Supervision Network’s (IMSN) annual

International Internet Sweep Days to target the

growing number of scams emerging on the

Internet.

In 1999 the ACCC became aware of an Internet

service provider, FreeNet2000, offering financial

inducements to introduce new members to their

ISP. FreeNet2000’s proprietor gave court

enforceable undertakings to stop promoting

the scheme and notify all participants and

subscribers that the scheme was no longer being

offered and that they were entitled to refunds

if they wished to discontinue subscription to

the ISP.

Premium call informationservicesPremium call information services use 1900

and similar numbers to charge consumers

for recorded information. The ACCC has

investigated several complaints that these services

were misleading, deceptive and unconscionable.

In 1998 the ACCC investigated a business known

as CDRC’s Financial Network which advertised

four 1902 premium toll numbers in local and

regional newspapers around Australia. They

charged consumers $5 per minute to inquire

about or apply for personal loans.

The ACCC took Federal Court action against

CDRC’s principal. It alleged that advertised

statements representing that personal loans

were available to callers to the 1902 lines, or

alternatively that the operator arranged loans on

behalf of callers, were misleading and deceptive.

It also alleged that false or misleading

representations were made to callers about

their prospects of getting a loan and, in some

instances, that they had been successful in

obtaining a credit card when they had not.

Finally, because the advertisements targeted

disadvantaged and vulnerable consumers such as

sole parents and pensioners, the ACCC alleged

that conduct was also unconscionable.

In September 1998 CDRC’s Financial Services’

proprietor consented to orders restraining him or

any legal entity with which he is associated from

engaging in the alleged conduct. He also agreed

to relinquish a sum of money that had been

preserved by the court. The ACCC established

procedures for affected consumers to receive full

or partial refunds.

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The ACCC and ACA are required to liaise over

a range of issues to ensure consistency in

economic and technical regulation.

Website: <http://www.aca.gov.au>.

Australian CommunicationsIndustry ForumThe Australian Communications Industry Forum

(ACIF) is an industry co-regulatory body

responsible for developing codes and standards

relating to the interoperability and inter-working

of networks. ACIF’s membership comprises

The ACCC has responsibilities under both the

Trade Practices Act and the Telecommunications

Act to liaise with other government and

telecommunications industry regulatory bodies.

Australian CommunicationsAuthorityThe Australian Communications Authority

(ACA) is the regulatory authority for technical

regulation, licensing, USOs, service quality

and spectrum management in the

telecommunications and radio communications

industries.

Industry liaison

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t e l e c o m m u n i c a t i o n s

service providers, together with nominees of

the ACCC and the ACA.

The ACCC also provides representatives to a

number of working groups established under

the various ACIF panels, such as the Consumer

Codes Reference Panel (CCRP), the Network

Reference Panel and the Operations Code

Reference Panel.

Website: <http://www.acif.org.au>.

Telecommunications IndustryOmbudsmanThe Telecommunications Industry Ombudsman

(TIO) is an industry-funded, independent,

consumer dispute resolution organisation, the

council of which comprises equal numbers of

member and consumer group representatives.

The Telecommunications (Consumer Protection

and Service Standards) Act 1999 requires all

telecommunications carriers, resellers and

Internet service providers to be members of

the TIO.

The TIO has power to make determinations,

binding on telephone companies and Internet

service providers, for amounts up to $10 000,

and to make non-binding recommendations

for amounts up to $50 000.

The TIO has the authority to investigate

complaints about: billing; faults; mobile services;

Internet access; the standard telephone service;

payphones; operator and directory assistance;

printed and electronic white pages; privacy; land

access; breaches of industry codes or standards;

and the Customer Service Guarantee.

It cannot intervene until a consumer has been

unable to resolve a dispute with the relevant

company, if the dispute is more than 12 months

old (unless there are exceptional circumstances)

or if legal proceedings have been commenced.

The ACCC’s predecessor, the Trade Practices

Commission, provided policy and training

support during the TIO’s establishment. The

ACCC liaises with the TIO over consumer issues.

The TIO can be contacted on 1800 062 058 (freecall) or via its website: <http://www.tio.com.au>.

International The ACCC liaises with a range of international

governmental organisations over

telecommunications issues, including the

Asia Pacific Economic Forum (APEC) and

the European Union.

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Contacts and addresses

Contacts

CHIEF EXECUTIVE OFFICER:

Brian Cassidy (02) 6243 1124

REGULATORY AFFAIRS DIVISION:

Joe Dimasi (03) 9290 1814— Electricity Group

Michael Rawstron (02) 6243 1249

— Gas GroupKanwaljit Kaur (02) 6243 1259

— Transport and Prices Oversight GroupMargaret Arblaster (03) 9290 1862

— Telecommunications GroupMichael Cosgrave (03) 9290 1914

COMPLIANCE DIVISION:

David Smith (02) 6243 1234

RESTRICTIVE TRADE PRACTICES UNIT:

Michael Kiley (02) 6243 1052

CONSUMER PROTECTION UNIT:

Carl Buik (02) 6243 1066

SMALL BUSINESS UNIT:

Nigel Ridgway (02) 6243 1223

GST OPERATIONS DIVISION:

John Grant (02) 6243 1297

CORPORATE MANAGEMENT BRANCH:

Helen Lu (02) 6243 1009

MERGERS AND ASSET SALES BRANCH:

Mark Pearson (02) 6243 1276

ADJUDICATION BRANCH:

Tim Grimwade (02) 6243 1226

LEGAL GROUP:

Bruce Brown (02) 6243 1273

Bob Alexander (General Counsel)

(02) 6243 1283

MEDIA LIAISON:

Lin Enright (02) 6243 1108

GENERAL PUBLICATIONS QUERIES:

Canberra: Robert Booth (02) 6243 1143

LIBRARY: (02) 6243 1152

PUBLIC REGISTER: (02) 6243 1330Email addresses for ACCC officers can be foundon the ACCC’s website: http://www.accc.gov.au

AddressesAUSTRALIAN CAPITAL TERRITORY (national office)

Chief Executive Officer, Brian Cassidy 470 Northbourne AvenueDICKSON ACT 2602PO Box 1199DICKSON ACT 2602Tel: (02) 6243 1111Fax: (02) 6243 1199

NEW SOUTH WALES

Regional Director, Glen BarnwellLevel 5, Skygarden77 Castlereagh StreetSYDNEY NSW 2000

From June 2001:

Level 7, Angel PlacePitt StreetSYDNEY NSW 2000GPO Box 3648SYDNEY NSW 1044Tel: (02) 9230 9133Fax: (02) 9223 1092

C o n t a c t s a n d a d d r e s s e s

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C o n t a c t s a n d A d d r e s s e s

ACCC website: http://www.accc.gov.au

TamworthDirector, Albert Julum39 Kable AvenueTAMWORTH NSW 2340PO Box 2071TAMWORTH NSW 2340Tel: (02) 6761 2000Fax: (02) 6761 2445

VICTORIARegional Director, Tom FahyLevel 35, The TowerMelbourne Central360 Elizabeth StreetMELBOURNE VIC 3000GPO Box 520JMELBOURNE VIC 3001Tel: (03) 9290 1800Fax: (03) 9663 3699

QUEENSLANDRegional Director, Alan DucretLevel 3, AAMI Building 500 Queen StreetBRISBANE QLD 4000PO Box 10048Adelaide Street Post OfficeBRISBANE QLD 4000Tel: (07) 3835 4666Fax: (07) 3832 0372

NORTH QUEENSLANDDirector, Scott GregsonLevel 6, Commonwealth Bank BuildingFlinders MallTOWNSVILLE QLD 4810PO Box 2016TOWNSVILLE QLD 4810Tel: (07) 4729 2666Fax: (07) 4721 1538

WESTERN AUSTRALIAActing Regional Director, Sam Di ScerniLevel 3, East Point Plaza233 Adelaide TerracePERTH WA 6000PO Box 6381EAST PERTH WA 6892Tel: (08) 9325 3622Fax: (08) 9325 5976

SOUTH AUSTRALIARegional Director, Bob Weymouth14th floor, ANZ House13 Grenfell StreetADELAIDE SA 5000GPO Box 922ADELAIDE SA 5001Tel: (08) 8213 3444Fax: (08) 8410 4155

TASMANIARegional Director, Peter Clemes3rd floor, AMP Building86 Collins StreetHOBART TAS 7000GPO Box 1210HOBART TAS 7001Tel: (03) 6215 9333Fax: (03) 6234 7796

NORTHERN TERRITORYRegional Director, Derek FarrellLevel 8, National Mutual Centre9–11 Cavenagh StreetDARWIN NT 0800GPO Box 3056DARWIN NT 0801Tel: (08) 8946 9666Fax: (08) 8946 9600