Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

On 26 November, Senator Ludlam asked me a question about the Australian Communications Consumer Action Network and the national broadband network. I seek leave to incorporate the response in Hansard.

Leave granted.

The answer read as follows—

On 26 October 2008, Senator Ludlam asked me a question on notice regarding the Australian Communications Consumer Action Network (ACCAN).

Specifically the Senator asked:

“Can the minister tell us the status of the new consumer protection body, the Australian Communications Consumer Action Network, in particular what date it will be established, who is on it and what role this network will play in the deliberations on the National Broadband Network tender?

… My question was specifically on what role this network will be playing as the tender process unfolds. Further to that, given that the operator of the network will, in effect, have control over a natural monopoly and that Telstra has indicated that it wants an 18 per cent return on investment, which according to some commentators could raise broadband prices by 50 per cent per month for users, what measures will be taken to protect consumers from price-gouging, particularly in regional areas?”

I undertook to provide the requested information.

Australian Communications Consumer Action Network (ACCAN)

ACCAN will be funded under section 593 of the Telecommunications Act 1997. It will commence operations as the peak communications consumer body representing the interests of communications consumers from 1 July 2009.

ACCAN has elected its founding Board, comprising:

• Nan Bosler, President, Australian Seniors Computer Clubs Association, and current Director of Consumers’ Telecommunications Network (CTN).
• Len Bytheway, Chief Executive Officer ACT for Kids and Director (Deputy Chair) of CTN.
• Aaron Davis, Chief Executive Officer, Indigenous Consumer Assistance Network.
• Gerard Goggin, Professor of Digital Communication, and Deputy Director Journalism and Media Research Centre, University of New South Wales.
• Catriona Lowe, Co-Chief Executive Officer, Consumer Action Law Centre and Chair of Consumers Federation of Australia.
• Kyle Miers, Manager, of National Information and Projects with Deaf Children Australia, President of Deaf Australia, and Founding member of Australian Federation of Disability Organisations.
• Holly Raiche, Executive Director, Internet Society of Australia, Director of CTN.
• Sue Salthouse, Director, Didactic Enterprise, Chair of the Communications Alliance Disability Council.
• Alex Varley, Chief Executive Officer, Media Access Australia.

The National Broadband Network (NBN) Request for Proposals (RFP), which sets out the Commonwealth’s objectives and evaluation criteria for the NBN, was released on 11 April 2008. The RFP details the respective roles of the Panel of Experts, the Minister for Broadband, Communications and the Digital Economy, government agencies and specialist advisers involved in the evaluation process. NBN proposals will be evaluated by the Panel of Experts, who will provide a report to the Minister for Broadband, Communications and the Digital Economy.

Several consumer organisations responded to the Government’s public invitation for submissions on the NBN, including the Australian Telecommunications Users’ Group and Telecommunications Disability Consumer Representation (TEDICORE, a project of the Australian Federation of Disability Organisations), and a number of organisations which have representation on the founding board of ACCAN such as the Internet Society of Australia and the Consumers’ Telecommunications Network. As detailed in the NBN RFP (clause 10.6.2), the Panel of Experts will be able to have regard to the regulatory submissions in its evaluation of proposals.

National Broadband Network and consumers

Clause 1.3 of the RFP clearly sets out the Commonwealth’s 18 objectives to establish a national broadband network that, amongst other things:

• enables uniform retail prices on a national basis;
• continues to promote the long-term interests of end-users;
• facilitates competition through open access arrangements that ensure equivalence of price and non-price terms and conditions, and provide scope for access seekers to differentiate their product offerings;
• enables low access prices that reflect underlying costs while allowing Proponents to earn a rate of return on their investment commensurate with the risk of the project;
• provides benefits to consumers by providing choice to run applications, use services and connect devices at affordable prices;

Clauses 1.5.10 - 1.5.23 of the RFP provide guidance in relation services, competition and open access, including the long-term interests of end-users and pricing.

In particular, clause 1.5.12 states:

Proponents should outline how consumers will be able to run applications, use services and connect devices at affordable prices. Proponents should outline the type of retail services that could be offered, for both business and residential consumers. The Commonwealth expects that consumers will enjoy affordable retail prices for NBN services, but also notes that services need to be priced so they are economically viable.

As indicated in clause 10.3.2, Proposals will be assessed by the Panel of Experts against the evaluation criteria specified in the RFP to identify the Proposal or Proposals that represent the best value for money. The evaluation against criterion 1 will involve an assessment of the extent to which a Proposal meets the Commonwealth’s objectives for the NBN process as set out in clause 1.3.

As indicated in clause 10.1.3 of the RFP, the value for money assessment of Proposals includes the overall costs and benefits of the Proposal (including long-term costs and benefits) to the Australian community as a whole.

Section 10.4 of the RFP outlines the role of the ACCC in the NBN process. Clause 10.4.2 states:

The ACCC will provide the Panel with ongoing advice on Proposals, including advice on issues such as wholesale access services and prices, access arrangements, proposed legislative or regulatory changes and the likely impact of Proposals on pricing, competition and the long-term interests of end-users in the communications sector.

Clause 10.4.2 of the RFP further states that the ACCC will provide a written report to the Panel. Clause 10.4.3 states that the Panel will consider the advice provided by the ACCC as part of its assessment process.

Schedule 2 of the RFP describes the information that Proponents should provide in their Proposals. The information provided by Proponents will be used in the evaluation of their Proposals.

Clause 1.5(a) of Schedule 2 of the RFP states

Proponents should describe the extent to which the Proposal will benefit consumers (residential, business and others) over the short and long-term through the availability of communications services and applications at affordable prices.

Clause 1.5.4 of Schedule 2 of the RFP further states:

For wholesale-only Proposals:

(a)

Proponents should provide estimated price and non-price terms and conditions,* key entry-level and basic retail services that a wholesale customer could offer consumers. Proponents should also set out the rationale for this estimate.

(b)

Proponents can if they wish also provide anticipated price and non-price terms and conditions for any other retail services and applications that a wholesale customer could offer consumers. Proponents should also set out the rationale for this estimate.

For Proposals that offer retail services:

(c)

Proponents should describe the arrangements for the supply of retail: services and applications and the range and nature of the proposed retail services and applications (i.e. the levels of functionality and performance).

(d)

Proponents should describe the proposed price and non-price terms and conditions for key entry-level and basic services to be supplied, including:

(i)

price and non-price terms and conditions.* the key entry-level and basic retail services over the investment term of the infrastructure;

(ii)

any geographical variation in pricing, noting the Government’s objective of uniform national pricing, or non-price terms and conditions—for example, connection or fault repair limes: and

(iii)

any proposed approach to the re-adjustment of price terms and conditions over the investment term of the infrastructure.

(e)

In describing price and non-price terms and conditions.* the retail services and applications, the Proponent should provide, on a per service basis, to the extent relevant, information including: downlink and uplink speeds, connection and disconnection fees, service activation and deactivation fees, any periodic charges, billing arrangements, data usage allowances, any excess data fees, shaping policies and service level assurances.

(f)

In providing pricing information for key entry-level retail services, the Proponent should identify any differences in proposed prices and non-price terms and conditions for residential and business customers.

All Proponents:

(g)

Proponents should provide a comparison between the price and non-price terms and conditions of the proposed services and applications with those currently available.

(h)

Proponents should explain the basis and rationale/Or the proposed price and non-price terms and conditions described above.* retail services and applications, including costs and costing methodology, expected take-up rates and price adjustment mechanisms.

(i)

Proponents should describe what will happen to retail prices over time if network traffic differs significantly from forecasts

Clause 3.1 of Schedule 2 of the RFP requests, amongst other things, that Proponents indicate how any requested legislative or regulatory changes may impact on consumers.

Clause 3.2 of Schedule 2 of the RFP goes to compliance with legislative and other regulatory requirements and states:

Particular regard should be given to compliance with law enforcement, national security, emergency service and consumer safeguard requirements.

These and other relevant sections from the RFP are provided at Attachment A.

Attachment A

Select clauses from the NBN RFP relating to consumer interests and protection

Services

1.5.10      Proponents should specify the services they intend to offer. Consistent with the network covering homes, businesses and other users, the Government is interested in both residential and business services. The network should be able to support a full range of services and applications that can be facilitated by greater access to high-speed broadband, including multicast, virtual private networks, high-definition video-conferencing, peer to peer content delivery and IPTV, as well as basic services such as telephony and other services such as smart meters.

1.5.11      The Government considers that consumers and businesses should be able to purchase key entry level voice and broadband services for the same price, irrespective of where they live or work. The NBN should enable uniform prices for basic entry level services. Proponents should provide the relevant pricing details for these services in their responses to Schedule 2.

1.5.12      Proponents should outline how consumers will be able to run applications, use services and connect devices at affordable prices. Proponents should outline the type of retail services that could be offered, for both business and residential consumers. The Commonwealth expects that consumers will enjoy affordable retail prices for NBN services, but also notes that services need to be priced so they are economically viable.

1.5.13      The Government will need to be assured that existing retail customers will experience no or minimal disruption to their services, and also that the migration of wholesale customers will not be subject to anti-competitive delays or processing timetables. Proponents should ensure that equivalent (or superior) services to those that are currently available can be offered to all existing customers.

Competition and open access

1.5.14      As noted above, the NBN will be a central platform for the Australian communications sector. The Government considers that the long-term interests of end-users should continue to be promoted. The Government is therefore determined to ensure that appropriate open access arrangements are in place to promote competition and ensure efficient investment. In this context it will be important to ensure that access is provided on equivalent price and non-price terms and conditions.

1.5.15      Proponents should clearly specify the wholesale access services they are proposing to offer in accordance with the details requested in Schedule 2. For example, Proponents should include details such as the proposed locations of Points of Interconnection, technical arrangements for service providers that acquire wholesale services and (where relevant) the availability of backhaul capacity to and from Points of Interconnection. In setting out these details, Proponents should keep in mind the Government’s objective of providing scope for access seekers to differentiate their product offerings.

1.5.16      Open access arrangements should apply to wholesale services to be provided over the NBN, including upgrades of services, as specified in the contract for the NBN. In accordance with section 1.4 of Schedule 2, Proponents should submit their proposed arrangements for ensuring open access to the NBN, including measures or models to ensure that access is provided on equivalent price and non-price terms and conditions. If a Proponent proposes to supply both wholesale and retail services it should demonstrate what structural measures or models it proposes be put in place and maintained to prevent inappropriate self-preferential treatment and ensure that effective open access is achieved on the terms required by the Commonwealth.

1.5.17      Proponents should outline how their proposed access prices have been determined with reference to the underlying costs of providing services and demonstrate that the underlying costs are incurred on an efficient basis. Access prices should be set as low as possible, to ensure the best outcome for consumers, while allowing Proponents to earn a rate of return on their investment commensurate with the risk of the project. Proponents should explain the basis on which they have derived the cost of capital, including how investment risks have been calculated.

1.5.18      As requested in Schedule 2, Proponents should describe how arrangements will provide scope for access seekers to differentiate their services by allowing the customisation of technical parameters (including but not limited to speeds, quality of service, latency, jitter, contention ratios and interleaving).

1.5.19      Proponents should also describe how access services will allow access seekers to offer enhanced applications such as multicast, virtual private networks, high definition video-conferencing, peer to peer content delivery and IPTV if desired.

1.5.20      If Proponents are proposing to roll-out new network infrastructure in regions where competing networks already exist, including in some cases existing FTTN and FTTP networks, they should indicate this as requested in Schedule 2. The Commonwealth expects that there will not be economically inefficient duplication of existing FTTN or FTTP infrastructure. Proponents are also encouraged to consider interconnecting with existing FTTN or FTTP roll-outs.

1.5.21      Where Proponents intend to use infrastructure owned by third parties they should indicate the type of access they will require and what arrangements have been reached, or would need to be reached, to ensure it is granted on terms and conditions that are satisfactory to it. Proponents should indicate their pricing assumptions for access to third party infrastructure, as requested in Schedule 2.

1.5.22      Proponents should identify the parts of the network that are commercially viable in their own right and those parts that would not otherwise be commercially viable without financial support.

1.5.23      If a Proponent considers that mechanisms are required to facilitate the Government’s objective of enabling uniform retail prices and the delivery of services to premises within the NBA footprint, it should clearly set out the nature of this mechanism. For example, if Proponents are proposing cross-subsidy arrangements within access prices to enable uniform retail prices, they should clearly identify the extent of any cross-subsidization, as well as other relevant details (see Schedule 2). If a Proponent proposes another type of mechanism to enable uniform retail prices, it should set out details about the nature of its proposed mechanism and other relevant details (see Schedule 2).