Telstra’s rivals warn about changes to telco competition law

Vodafone stridently opposes proposed changes to Competition and Consumer Act 2010

Vodafone and Optus have both warned the government about potential negative impacts on the telecommunications market from a move to scrap telco-specific competition laws.

The government late last year said it would make changes to Divisions 2 and 3 of Part XIB of the Competition and Consumer Act 2010 (CCA).

Division 2 governs the standard for assessing anti-competitive conduct by telcos, and Division 3 governs a scheme for exemptions and for the issuing of legally enforcable competition notices by the Australian Competition and Consumer Commission (ACCC).

As part of its response to the Competition Policy Review (Harper Review), the government said it would make changes to Section 46 of the CCA that would obviate the need for Part XIB’s specific anti-competitive conduct provisions, which only cover the telco industry.

However in a submission to Senate inquiry into the government’s proposed changes, Vodafone said that although it supports the proposed changes to Section 46 of the CCA it “strongly opposes” the repeal of Division 2 and Division 3 of Part XIB.

“It would simply make no sense to substantially reduce competition oversight in the communications sector without a serious examination of the state of competition in the communications sector,” Vodafone’s submission states.

The telco noted that the ACCC is currently conducting a market study of the communications industry, arguing that changes to Part XIB should be shelved until the ACCC’s work is complete.

“The immediate repeal of Part XIB places far too much trust in an untested new legislative provision (the revised section 46),” Vodafone argued.

In a submission lodged last year with the inquiry, Optus was more measured in its criticism. Optus said it supported the proposed changes to Section 46, but added that “the case for repealing Part XIB of the CCA is more finely balanced”.

“The telecommunications market remains highly concentrated and is in a period of transition as related services and markets are starting to converge,” the telco argued. “New sources of market power are arising that are divorced from traditional ownership of infrastructure. The protections afforded by Part XIB are no less as important as they were in 1997.”

Part XIB should be repealed “only be repealed if the amendments are made to improve the operation of s46”.

The Optus submission added: “Further, we believe that mandatory factors that a court has to consider in determining whether conduct is anti-competitive should have a narrower application in the telecommunications sector.”

The telco said consideration of whether conduct is deemed to be undertaken to enhance efficiency and innovation should not apply in the case of the telecommunications industry, noting that the industry typically has high fixed costs and increasing economies of scale.

“These concepts have wide spread application in telecommunications and could be used to shield anti-competitive conduct from enforcement action,” Optus said.

A submission from David Forman on behalf of the Competitive Carriers Coalition noted that “EVERY submission from competitors to Telstra provided to the [Department of Communications] in its review of Part XIB last year opposed the abolition of the telecommunications specific provisions of Part XIB.”

“If the protections under Part XIB had truly been rendered redundant by the proposed changes to Section 46, this is unlikely the industry would have responded in this fashion,” the submission added.

Macquarie Telecom said the competition notice power under Part XIB are “crucial” to the resolution of disputes, “because they mean Telstra is subject to quick and decisive regulatory intervention if the Commission is dissatisfied with its response to complaints about its conduct.

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Tags VodafoneTelstraTelecommunicationsoptusAustralian Competition and Consumer Commission (ACCC)competition

More about Australian Competition and Consumer CommissionDepartment of CommunicationsMacquarie TelecomOptusVodafone

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