Minister hands special Statement of Expectations to the ACCC – what is going on behind the scenes?

The Minister for Communications, Cyber Safety and the Arts, Paul Fletcher, has issued a special Statement of Expectations (SoE) to the ACCC regarding its telecommunications-related functions on 9 October 2020. This new SOE apparently sits alongside the generic SoE issued to the ACCC by the Treasurer.

What should we make of this development? Why would the telecommunications industry be signalled out for special attention when it comes to setting the expectations that government has for the ACCC?

The generic form of the ACCC’s SoE is a rather innocuous document that outlines what one would expect of a competition regulator. The most important part of the document is the government declaration of its de-regulation agenda. This has been part of the Coalition Government’s policy for some time and it clearly is looking to the ACCC to be part of its plan “to reduce compliance costs for business and community and contribute to the Government’s $1 billion red and green tape reduction target”.

It should be noted here that the telecommunications industry has been the exception when it comes to this de-regulatory agenda. The Coalition Government and the ACCC have  imposed a series of regulations on non-NBN Co fixed broadband companies, and in particular TPG Telecom, to protect NBN Co from competition and re-inforce its monopoly (see for example here). Furthermore the difficulty of doing business in the sector has increased markedly as NBN Co continues to introduce extraordinarily complex pricing plans into the market that seek to control the retail pricing plans made by RSPs (see here $$$).

The generic SoE for the ACCC also outlines the Government’s preference for “principles-based regulation that identifies the desired outcomes, rather than prescribing how to achieve them”.

But what about the new telecommunications SoE for the ACCC? The tone of this document is very different with specific details on how the ACCC should go about its work in some key areas, particularly in regard to the NBN.

The telecommunications SoE points to how the ACCC “could” approach the task of regulating the prices of NBN Co’s Multi Technology Mix networks. It is also explicit in setting clear expectations that NBN Co “will play a key role in increasing competition in the business segment of the market via its build activities”. Both of these statements appear to go beyond the “principle-based regulation” that the generic SoE from the Treasurer requires of the ACCC.

By highlighting these specific issues, is the Government looking for specific outcomes that would not normally be the result of “principles-based regulation” where the same principles apply to all regulated entities (private and public)?

Under the heading of “Regulator Performance” the telecommunications SoE appears to be pointedly reminding the ACCC of the importance of its job and the need to be consultative, transparent and follow a robust process that is designed to minimise negative consequences. Regulatory intervention by the ACCC should have regard to the promotion of the long-term interests of end users of telecommunications services. These are non-controversial statements that are explicitly or implicitly already expected of the ACCC  through its legislative framework or the generic SoE provided to the ACCC.

Which begs the questions – why is the Minister explicitly setting expectations that the ACCC should be following rules that are already part of its regulatory mandate? Does the Minister believe the ACCC has not been acting in this way in some of its previous regulatory work in the telecommunications industry? What is the reason for the Minister needing to remind the ACCC of its general obligations?

Under the heading of “Relationship with the Department of Infrastructure, Transport, Regional Development and Communications” the Minister highlights the need for the ACCC to work closely with his Department which advises him on telecommunications policy. In particular the Department should be provided with “sufficient advance notice of significant actions affecting the telecommunications sector”. Such a statement, being made in a formal SoE, smacks of behind the scenes tensions, disagreements and worries that the Minister will be ambushed by the ACCC.

What is the Minister getting at with such pointed expectations of the ACCC, that verge on being a set of directions to the independent competition regulator?

Perhaps the Chair of the ACCC, Mr Rod Sims, hinted at some of this in his appearance in front of Senate Estimates on the 27th October 2020, as reported by iTnews.

“The essence of the [telecommunications] SOE is to keep the minister informed of what we’re doing and to start work on a new structural access undertaking which will govern the regulatory arrangements of the NBN, which have been somewhat in abeyance because the previous structural undertaking applied to the FTTP model and when we went to the MTM model it was just sort of left hanging,” Sims said.

Based on this response the SoE has been issued to ensure that the ACCC, the Department and the Minister are all on the same page when it comes to updating the regulatory pricing arrangements applicable to the non-FTTP technologies. In setting these arrangements the ACCC is supposed to act as an independent, neutral umpire that takes as its primary objective the long term interests of end users of telecommunications services. There is normally a formal submission process that is part of the consultative, transparent and robust process that the Minister specifically mentioned in the SoE.

Why is the Minister wanting some extra dialogue, notice and special treatment regarding the ACCC’s considerations regarding this important activity? Does this dialogue bias the outcome in ways that disadvantages other parties (such as retail service providers and ultimately consumers) that will be affected by the ACCC’s decisions?

One conclusion could be that the Minister, as one of the Shareholder Ministers for NBN Co, is looking to influence the outcome of the ACCC’s decision process in a way which seeks to maximise the financial prospects for NBN Co, thereby increasing possible future returns from the privatisation of NBN Co.

Mr Sims, highlighted such a possibility in his response to some of the questions at Senate Estimates. Again, as reported by iTNews :

[Sims] criticised the privatisation of assets “in a way that often sees the price go up”.

“Users lose just so we can sell them for a very big price, which I don’t think is a very good idea,” he said.

“Here [with NBN Co] what we’ve got to do is just make sure that we get the benefit of this very important technology that can provide very fast data.

“The good news is it was built in time as Covid arrived so we’ve all been able to take advantage of it, but we’ve got to keep in mind that what’s important here is getting the most efficient use of this $50 billion spend, as distinct from necessarily getting a return on that spend.

“I think that’s a principle that applies for a lot of infrastructure, where government has fundamentally been the one that’s built it.”

Mr Sims, in a somewhat ominous tone that implies the matter may be taken out of the ACCC’s hands said, in response to questions regarding the possibility of NBN Co raising its entry-level and mid-tier pricing that this would not be permissible “if we have anything to do with it”.

Hopefully the ACCC will have something to do with it and NBN Co will be required to act like any other monopoly in Australia in a way that is subject to the laws and regulations of the land and not get any favours because it happens to be a wholly-owned subsidiary of the government.

We now await the ACCC’s formal response in its Statement of Intent that needs to be provided within 3 months.

The post Minister hands special Statement of Expectations to the ACCC – what is going on behind the scenes? appeared first on Gary McLaren.

This post was originally published on Gary McLaren.