page 1 acma international training program liberalisation - the incumbent’s perspective danny...
TRANSCRIPT
Page 1
ACMA International Training Program
Liberalisation - the incumbent’s perspective
Danny KotlowitzTelstra Regulatory & Competition Legal Group
5 September 2006 Page 1
Page 2
Introduction
Who we are State of the market Regulation Competition policy Social policy Conclusion
Page 3
Company information
Telstra is Australia’s leading telecommunications and information services company, with one of the best known brands in the country.
We offer a full range of services and compete in all telecommunications markets throughout Australia:
Total fixed lines in service: 9.94m lines Mobiles: 8.488m customers Online: 2.5m Internet customers Pay TV (bundled): 343,000 subscribers
Telstra has over 1.6 m shareholders
Notes: (i) data from Telstra full year results June 2006; (ii) mobiles customer numbers exclude MVNO customers; (iii) online customer numbers exclude wholesale SIOs; (iv) Pay TV bundle is for Foxtel or Austar
Page 4
State of the Market
No limit on foreign investment in carriers and carriage service providers competing with Telstra
Over 160 carriers and 1000 carriage service providers Over 700 ISPs (10 have in excess of 100,000
customers) Four 2G/3G MNOs and numerous MVNOs and MVARs Three mass market wireless broadband network
operators (aside from the MNOs) and several niche operators
Numerous VoIP providers including ISPs and standalone VoIP-over-DSL providers through major retailer channels – numbering over 180 services (see “Aussie VOIP list” at http://www.marketclarity.com.au/voip/)
Page 5
State of the Market
Telecoms contributed 2.65% of GDP in June Quarter 2005
The industry employed 185,279 people in August 2005
Between 1997 and 2004, overall telecoms services prices fell by > 18%
Between July 1997 and June 2006 Telstra's labour force declined from 76,585 to 42,507 persons (FTE)
But competitors have employed approximately 60,000 more in same period
Sector Annual Growth
communications services
5.9%
GDP 3.7%
construction 5.6%
manufacturing
2.1%
finance & insurance
4.8%
culture/recreation
3.4%
10 years to June 2005
Page 6
71%
Local
63%
Domestic LD
50%
International LD
45%
Mobile****
64%
Data**
59%
Subscription TV13%
Sensis Advertising
(main media)
26%
Narrowband***
20%*
Source: Product Management Estimates* Approx. % of local calls/basic access resold over Telstra’s network. ** Revenue Market Shares based on Dec 2004 YTD revenue. Products in Data and Internet & IP groupings match corporate accounting lines. Data no longer includes ISDN.*** Total market subscriber estimates are based on IDC total market estimates. **** Dec 2004 market share based Telstra Dec 2004 data and competitor data to Dec 2004, Sept 2004 (Hutchison).
Basic Access
18%*
Telstra share Other Resold
41%
Broadband***
73%
Telstra’s Market Share (2004/5)
Internet & IP**
39%
39%
Page 7
State of the market: broadband penetration
Page 8
TECHNICAL REGULATION
COMMERCIAL INFORMATION
CONSUMER INFORMATION
TELECOMMS COMPETITION
NETWORKFUNCTIONALITY
RETAIL PRICE CONTROL
MISCELLANEOUS
NETWORK COVERAGE
TIO
Certify Cabling
Section 105Part XIB
RKRs Emergency
services
Preselection / pre-paid mobiles
Interception regulation
Number portability
Applies to all carriers and carriage service providers
Specific legislative obligation applying to Telstra only
ACIF Obligations
ItemisedBilling
Untimed Local Calls
Price Caps
Free operator & directory assist for residential
Telephone sex services
Land Access powers and immunities
Equivalent to AMPS network
Integrated public number database
& access
Part 21 Obligations
ACIF Industry Codes
Publish and provide phone
directory
Part XIC TPA(Access Regime)
Part XIB TPA (competitive
conduct)
Operator & Directory
Assistance
SFOA
General TPA Provisions
Preselection and override
codesDivision 12 Reporting Line Caller
Identification
000
Privacy Obligations
National Security
Enforcement
Customer Service
Guarantee
Industry Development
Plan
Defence & disasters
Privacy Commissioner
Numbering Plan
Network Reliability
Framework
Aspirant CUSPs
BSC Tariff
Priority Assistance
QUALITY OF SERVICE
Carrier Access
Universal Service Obligation
OEZ Contract
LIMAC
DDSO
The Regulatory Environment
Local Presence
Plan
Operational Separation
(Red text = new in 2006)
Page 9
Economicbenefit
Extent of competition-simulatory regulation
Impact of regulation
At any given point in time the extent of regulation that simulates competition has a 'tipping point' where it becomes pro-competitor not pro-competitive
Judging the appropriate extent of regulation necessary, is the key regulatory challenge
Incumbents are not ‘magic puddings’
Page 10
Regulation: a growth industry!
Between July 1997 and October 2005: the number of legislative and regulatory instruments for
telecoms grew from 20 to 348 the total number of pages of these instruments grew from 1,602
to 10,103 In the 2005-6 financial year:
Telstra staff spent 144,600 hours writing reports to regulators a total of 485 reports (206 weekly, 77 fortnightly, 120 monthly,
56 quarterly, 6 half-yearly, 17 annual, 2 triennial) 162,654 pages
Government, regulators and ombuds employ around 550 people in the communications area
Last month the Minister announced a review of telecommunications regulatory reporting with a view to identifying opportunities to streamline reporting and remove redundant or unnecessary industry reporting requirements
This follows the report of the Taskforce on Reducing the Regulatory Burdens on Business (the Banks Report) which acknowledged the concerns of Telstra, Optus, Vodafone and others(See: www.regulationtaskforce.gov.au/index.html for more information)
Page 11
Trends in regulation internationally
Trend away from ex ante regulation Retail price controls abandoned even in markets
where incumbents retain 90%+ market share (eg. Germany, Holland, Sweden)
Focus of regulation has moved from retail to wholesale attempt to address source of market power distortions caused by regulation of same services
at both retail and wholesale levels Alignment of telecoms competition regime with
general competition law EU framework requires NRAs to identify markets
where operators have significant market power
Page 12
Competition Policy - Australia
Competition law applicable to all participants in all Australian markets says that: A corporation that has a substantial degree of
power in a market is not permitted to take advantage of that power for the purpose of - substantially damaging or eliminating
competitors preventing competitors from entering market deterring or preventing competitive conduct
Telecoms markets have their own special, tougher test: A corporation that has a substantial degree of
power in a market is not permitted to take advantage of that power with the effect of – substantially lessening competition in a
telecoms market
Page 13
Competition Policy - Australia
Telstra accepts that some regulation is necessary In a competitively mature market regulation should be
rolled back, not extended as is happening in Australia with new operational separation provisions in our legislation
Telecoms-specific access regulation should be removed
Ill-conceived regulatory settings can distort industry investment
Below-cost access reduces the incentive for industry to invest in network improvements or innovation
Result: bottlenecks are perpetuated investment and innovation are discouraged harm to both society generally and customers
individually Regulatory ‘creep’ into new services and markets
where no legacy bottlenecks exist
Page 14
Social Policy
Guaranteeing Universal Service and affordable basic voice call services are fundamental government goals
eg. government has a stated policy of geographic price parity
Historically it made sense for the government-owned monopoly to absorb the cost of this regulation – because the Universal Service fund is perpetually undercosted, Telstra has cross-subsidised the provision of service in non-profitable areas
However, in a competitive market should the burden remain solely with Telstra and its shareholders?
A fundamental principle of effective regulation is competitive neutrality
Social and competition policy must be aligned Inconsistent approaches to pricing e.g. ULLS mean it is
now under threat
Page 15
Social Policy: is Australia different?
Page 16
Social Policy: USO cost is a Ministerial call
Page 17
Conclusion
Telstra has serious concerns as to whether, following recent new legislation and the current round of pricing decisions by the ACCC, Australia can continue to portray itself as an international best-practice regulatory jurisdiction
The dilution of government ownership in T3 (the full sale of Telstra) should help Australia raise its game on regulation
“For too long, the government has had a massive conflict of interest, as the owner and seller of Australia’s largest telco; and as the industry regulator. … The Government does not have to own Telstra in order to regulate it. The government regulates the entire telecommunications industry, regardless of Telstra’s ownership structure.”
- Prime Minister Howard, 25 August 2006Keep up to date with the debate on Australian telecommunications regulation
at: www.nowwearetalking.com.au