ACCC should give up telecom regulatory powers, says former head

Graeme Samuel supports TPG right to do FTTB, slams Optus' call to break up Telstra

Former ACCC chair, Graeme Samuel

Former ACCC chair, Graeme Samuel

A former chairperson of the Australian Competition and Consumer Commission (ACCC) has supported spinning off the agency’s telecom regulatory role to a specialist entity.

At the Charles Todd Oration in Sydney, Graeme Samuel – chair of the ACCC from 2003 to 2011 – backed recommendations from the Vertigan NBN review and Harper competition review on the future role of the ACCC in telecom regulation.

While Samuel said the ACCC could retain its role enforcing competition laws, he recommended the establishment of an “essential services commission” that would bring all utility regulators into one agency, “working on analytical issues, mainly focussed around the pricing and conditions of access to monopoly and quasi-monopoly services.”

The commission would bring together regulatory functions of the ACCC and the Australian Communications and Media Authority (ACMA), as well as energy regulators, he said.

“There are compelling reasons for this,” said Samuel. “The pricing and access analyses of determinations require a specific regulatory economic expertise and culture. That culture is directed to solving market distortions through the complex process of regulation as directed by legislative agreement. It is a culture with secondary focus on competition and its application to market structures and behaviour.”

However, Samuel criticised other aspects of the Vertigan review, and utterly condemned a separate Coalition government-commissioned review by Bill Scales that slammed Labor’s National Broadband Network.

"Unfortunately much of the review analysis has had a political tarnish, which diminishes its value in forward planning for this important infrastructure planning,” Samuel said of the reviews commissioned by the Coalition government.

The Vertigan reports “rely on prognostications as to the demand of broadband well into the future,” he said. “Recent history in this area demonstrates one certainty: That prognostications in the area of telecommunications technology can at best only be classified as guesstimates.”

The Scales report was the “least valuable,” as well as “insulting and offensive” to the experts consulted by the previous government, he said.

“Scales’ report is factually wrong on the role of the ACCC as attested by both myself, the current chair of the ACCC and others in the organisation.”

Also on the NBN, Samuel said he didn’t see a problem with TPG rolling out fibre-to-the-basement services that could compete with NBN infrastructure. NBN Co has said this practice would hurt the business model under which it can sell services to higher-cost regional areas at the same price as urban areas.

The ACCC has ruled that it won’t take action against TPG. But afterward, Communications Minister Malcolm Turnbull announced a licence condition that would force telcos such as TPG to functionally separate their retail and wholesale arms.

“I doubt that [TPG] will cause any more aggravation to NBN Co than the flea on the elephant’s back,” said Samuel.

“But the fact that such rollouts can be economically sustained should lead one to the conclusion that in the interests of facilities-based competition, they should not be opposed. Unless … the preservation of the NBN Co’s business case is the primary driver rather than that of competition.”

Samuel blamed past policy decisions for allowing the TPG situation to become a problem at all. He said the reason that TPG can offer the FTTB service was “the adoption by policymakers of distorted pricing mechanisms and non-transparent cross subsidies to resolve the uniform pricing across urban, regional and rural Australia.

“The hidden cross subsidy inevitably leads to distorted pricing in urban areas, which enables – indeed it encourages – cherry picking … If efficient pricing practices were adopted, cherry picking would be a sparse if not a fruitless exercise.”

Also in the talk Samuel slammed Optus chairman Paul O’Sullivan for calling for a break-up of Telstra, a statement that was quickly rebuked by Telstra.

“Paul laments the fact that Telstra has and will derive substantial financial strength flowing from its commercial agreements with NBN Co … Forgive me if I begin to sound like my former nemesis, [ex-Telstra head of public policy] Phil Burgess, but Telstra has already had its wings heavily clipped with its legislative structural separation.”

Telstra competitors have an opportunity to win customers by providing better content, Samuel said.

Optus, Vodafone, iiNet and others “all have got capacity to enter into arrangements on content, and they ought to do it, and not just sit back and wait and see if some government can put a squeeze on the big Telstra and say stop.”

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of dystopian sci-fi novels We, The Watched and Divided We Fall. Follow him on Twitter: @WatchAdam

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Tags FTTBTPGregulationnational broadband networktelecomcompetitionTelstrabroadbandNBNAustralian Competition and Consumer Commission (ACCC)structural separationaccc

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