TELSTRA CORPORATION LIMITED - Submission to the Inquiry into Regulatory Barriers to Regional Economic Development
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DRAFT – FOR DISCUSSION ONLY
TELSTRA CORPORATION LIMITED
Submission to the Inquiry into Regulatory Barriers to Regional
Economic Development
Conducted by Victorian Competition & Efficiency Commission
22 November 2004DRAFT DOCUMENT ONLY
1. Introduction
Telstra welcomes the opportunity to contribute to this inquiry into Regulatory Barriers to
Regional Economic Development. Telstra, through its Country Wide division, plays an
important role in providing infrastructure and services that assist regional economic
development, and is keen to assist the objectives of the Inquiry. Correct regulatory settings are
an important component in achieving successful economic outcomes, and it is appropriate that
the Victorian Competition and Efficiency Commission (VCEC) looks at the role of regulatory
settings in regional Victoria.
As a national provider of telecommunications services, Telstra will focus its comments on the
relationship between national and State regulations, and the role that State Governments can
play in providing incentives for investment in regional areas. There are also a number of
fundamental regulatory principles that Telstra believes should be included in any consideration
of the impact of regulation in regional economies, which Telstra will outline in this submission.
These principles have been developed through Telstra’s involvement in a number of specific
telecommunications policy reviews, but are applicable beyond the confines of the
telecommunications industry.
Telstra notes that Telecommunications Policy and Infrastructure Provision are specifically
excluded from the terms of reference for this Inquiry, and will offer only limited comments on
these areas in this submission. However, in parallel with this submission, Telstra is also
presenting a submission to the Victorian Government’s Inquiry into Regional
Telecommunications Infrastructure for Business, where its views on these matters will be
outlined for interested parties.
The key points that Telstra makes in this submission are:
• Clearly defined policy criteria should be used in assessing the operation of current
regulation
• The coordination of State-based regulation with other State or Federal regulation is
important for firms that operate at a national level.
• Regulatory harmonisation would assist in reducing business costs and increasing certainty
for consumers and businesses.
• The increasing complexity and scope of local planning processes can lead to cost
increases and investment delays, which could be addressed via a more streamlined State-
based planning policy.
• Competition and regional development can be facilitated by the application of competitively
neutral Government infrastructure funding, leading to substantial community benefits in
regional Victoria.
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2. General Regulatory Principles
Australia can be justifiably proud of its strong tradition of principled regulation and sound policy
development. Telstra believes it is critical that any assessment of the impact of regulation on
regional economic development should take into account the degree to which current and
proposed regulations comply with Australian and international “best practice” regulatory
standards.
Telstra submits that there are a number of Australian and international policy principles that can
be distilled to form a ‘checklist’ for the Inquiry in determining whether existing regulation
operates in a manner that is both consistent with Government policy, and compliant with best
practice regulatory standards. Telstra clearly has a focus on the application of the regulatory
principles in the telecommunications industry, but believes they are also relevant to a more
general evaluation of the regulatory environment. These principles are drawn from three
sources:
• statutory policy principles;
• Australian regulatory standards; and
• international regulatory best practice.
2.1 Statutory policy principles
There are a number of telecommunications-specific policy principles articulated in the
Telecommunications Act 1997 and the Telecommunications (Consumer Protection and Service
Standards) Act 1999 (CPSS Act). For example, the primary objective of Australian
telecommunications policy is promoting the long term interests of end-users of
telecommunications services, and the efficiency and international competitiveness of the
Australian telecommunications industry1. These specific telecommunications principles have
relevance in determining the most appropriate form of regulation in a number of other industries
that are important in regional Victoria.
2.2 Australian regulatory standards
In addition to the Statutory Policy Principles, there are a number of well-recognised principles
that apply to policy formulation and the implementation of regulation in Australia. For example,
in the Commonwealth context, a Regulation Impact Statement (RIS), which formalises the
processes necessary to ensure robust, efficient and effective public policy solutions, must
accompany any significant regulatory change.
Telstra submits that in Australia it is well accepted that policy solutions, and their
implementation in regulation, should be formed via an open and accountable process, and:
• Generally, protect the interests of consumers and other affected members of the public
(‘consumer protection’);
1
Telecommunications Act 1997, s.3(1).
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• Be the most effective and efficient means of achieving the relevant policy objective
(‘efficient and effective’);
• Operate in a competitively neutral manner (‘competitive neutrality’);
• Not discriminate between forms of technology (‘technology neutrality’);
• Be clear – and clearly understood by - all affected parties (‘certainty’); and
• Be shown to benefit the community as a whole (‘cost-benefit analysis’).
2.3 International best practice
A review of international guiding principles for best practice regulation suggests that there are 6
core principles for assessing the effectiveness of regulation2:
• Transparency (openness in the regulatory and decision making process);
• Accountability (regulators can publicly justify their decisions, and decisions should be
subject to public scrutiny);
• Predictability and certainty (the regulation and the interpretation of what is involved in
compliance does not change arbitrarily; Investors should not face arbitrary changes in
outcomes as a result of regulatory changes);
• Competitive neutrality (the regulation does not provide a competitive advantage for one
organisation over another);
• Proportionality (the form and extent of regulation should be proportionate to the
perceived problem or risk); and
• Cost effectiveness (the regulation does not impose higher administrative and
compliance costs than necessary).
These principles are consistent with the Australian regulatory standards identified above.
2
See for example Australian Utility Regulators’ Forum Best Practice Regulation, 1999; United
Kingdom Better Regulation Taskforce Principles of Good Regulation, 1997; OECD Reference
Checklist for Regulatory Review; OECD Guidelines for improving regulatory quality.
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2.4 Suggested policy criteria for the Inquiry
Telstra submits that Australian and international regulatory and policy principles can be distilled
to form a ‘checklist’ for the Inquiry to use in assessing the current operation of regulation in
regional Victoria. Ensuring that legislation operates efficiently and achieves certainty will
provide significant benefits for both consumers and industry. Failure to do a full analysis that
takes into account each of the matters above will result in regulation that will not maximise
consumer benefits and could result in inefficient, costly and uncertain outcomes for both
business and consumers alike. Telstra submits that the Inquiry could ask the following
questions in relation to the current regulatory regime:
• Does it best protect the interests of residents and business in regional Victoria?
• Is it the most efficient and effective means of achieving desired economic outcomes?
• Does it operate in a competitively neutral manner?
• Does it achieve certainty and predictability for industry, investors and consumers?
• Does it operate in a technology neutral manner?
• Would it pass a properly conducted cost-benefit analysis?
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3. Impact of State-based Regulation
Telstra is one of the most heavily regulated companies in Australia, and is subject to a range of
regulatory measures that are specific to it. The wider Australian telecommunications industry
faces many specific pieces of regulation, and a variety of regulatory bodies play a role in
enforcing that regulation. The diagram below gives some sense of the extent of the regulatory
regime faced by Telstra and other telecommunications providers.
National
Security
Defence & Aspirant Section Enforcement
Part XIB disasters CUSPs 105
RKRs Numbering
Emergency Plan Privacy
Part XIB TPA
(competitive services Commissioner Priority
conduct) Interception Assistance
regulation
Preselection
TELECOMMS Number and override COMMERCIAL
COMPETITION portability codes INFORMATION Certify
Division 12 Cabling ACIF
Reporting Obligations
Line Caller
Identification
NETWORK
Part XIC TPA OEZ
(Access FUNCTIONALITY Contract Preselection /
Regime) Itemised pre-paid
BSC Billing mobiles
Tariff
Price Caps
Operator & General TPA
Directory Provisions RETAIL PRICE
Assistance 000
CONTROL
SFOA
Untimed
CONSUMER Local Calls Free operator &
LIMAC directory assist
INFORMATION for residential
Publish and
provide phone
directory Network
Privacy
Ob ligations
Obligations Reliability NETWORK Telephone sex
Framework services
COVERAGE
Integrated public
number database Carrier Access
& access TECHNICAL QUALITY OF
REGULATION SERVICE Customer MISCELLANEOUS
Service Equivalent to
Guarantee
AMPS network
Land Access
Applies to all carriers and carriage service providers powers and
ACIF Industry immunities
Part 21 Codes Industry
Obligations Development Universal Service TIO
DDSO Obligation
Specific legislative obligation applying to Telstra only Plan TIO
Figure 1: Regulatory obligations for Telstra and other telecommunications providers.
These specific regulatory instruments are enacted at a national level, rather than at a State
level. As a result, Telstra has specific obligations to ensure that basic voice and data services
are made reasonably available to all people, wherever they reside or carry out a business.
Telstra submits that due to the telecommunications industry’s complexity, it is vital that any
regulator understands its intricacies before introducing further regulation. Rules and
regulations determining what is appropriate in one industry may not be appropriate or
necessary in another industry. This means that legislation with broad scope, such as might be
introduced by State Governments, needs to be assessed against a checklist of policy criteria
such as those suggested in the previous section.
6DRAFT DOCUMENT ONLY
In addition to the specific telecommunications regulations, Telstra and other carriers also face
the same general regulatory regime as other businesses. These regulations can be either
applied at the National or State level. As a business that operates nationally, State-based
regulation that is inconsistent with other regimes (either State or Federal) impacts upon Telstra.
Any inconsistencies result in duplication of internal standards and processes, and introduce
additional expenses into the business. Before any new State-based legislation is introduced,
Telstra believes that it needs to be assessed against any existing legislation in other regimes to
first determine the need for additional legislation, and then to assess how it will interact with
existing legislation.
For example, both Victoria and New South Wales have recently introduced new Fair Trading
Acts (FTA). Telstra supports the general principles of consumer protection that these pieces of
legislation are attempting to address. However, Telstra has concerns with how well these
specific Acts will achieve these objectives, given that there is already existing legislation that
addresses the areas covered by the FTA. The existing consumer protection arrangements
should be allowed to develop prior to consideration of further regulation. It should not be
assumed that more regulation is always better for consumers. New legislation will add a further
layer of complexity in the consumer protection area. Greater uncertainty resulting from
duplication and potential inconsistency of regulation in this area will increase compliance costs
for businesses, which are ultimately borne by the entire community. Instead, if the policy criteria
identified in Section 2.4 are applied to this type of State-based legislation, it may well be the
case that it does not meet all the policy principles.
Beyond this specific example, there will be other examples of legislation developed by States
that may introduce inefficiencies in business operation that could have been avoided by a
principles-based analysis of the operation of existing legislation. Where possible, it would be
preferable to produce regulation that is consistent across jurisdictions, to reduce uncertainty
and increase efficiency. Telstra believes that there is an important principle to be considered in
relation to industries that cross State boundaries. This principle is that the extent to which
regulations differ across State boundaries should be minimised and only varied to the extent
necessary to take into account unique differences between the States. The concept of “mutual
recognition” in relation to the regulatory regimes that exist between the States and between
State and Federal regulation may be one that this Inquiry wishes to consider. The development
of a mechanism for national harmonisation of the regulatory environment in order to promote
certainty and efficiency would be an important advance in reducing costs and improving
consumer certainty. While such a measure may be beyond the scope of this Inquiry, if the
Inquiry were able to recommend some initial steps in this direction, it would produce long-term
benefits for regional Victoria, and beyond.
Such a move would be consistent with the policy principles of efficiency and effectiveness,
certainty, cost-benefit analysis and consumer protection. As such, Telstra submits that this
Inquiry should identify the opportunities for the VCEC or Victorian Government to address the
issue of regulatory harmonisation.
Another area in which regulatory inconsistencies impact on economic development is in local
planning laws. Telstra’s ubiquitous deployment of infrastructure and services is made more
complex by the myriad differences that exist in the planning laws for each local council.
Different requirements and processes in councils potentially introduce inefficiencies in the
delivery of new infrastructure. This Inquiry has the opportunity to consider alternative
approaches that may assist businesses that operate across a number of areas of regional
Victoria to achieve more efficient outcomes, ultimately benefiting all Victorians. Telstra’s
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experience has been that local planning processes have become increasingly expensive in
terms of time taken and fees required for approval of new investments. Simplification of
planning processes across the State would provide opportunities for more efficient and
effective investment by a range of industries and promote development. However, Telstra
recognises that local circumstances are important in determining appropriate planning
outcomes. Telstra therefore suggests that the Inquiry considers how additional complexity in
planning processes could be reduced.
Telstra also notes that there are strong linkages between the investment decisions of firms and
regulatory settings. If investment returns are eroded by the inappropriate application of new
regulation, incentives for future investment will be diminished, compromising the future
development of regional economies. Consideration of the impact of regulation on existing
investment relates to the policy principle of certainty referred to in Section 2, as well as the
performance of an appropriate cost-benefit analysis.
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4. Incentives for increased Competition
One of the roles of States is to provide appropriate incentives for investment in new services
and infrastructure that further economic development. It is critical that policy principles such as
those outlined in Section 2 are employed to ensure the most effective outcomes are achieved.
Referring specifically to the telecommunications industry, a number of initiatives implemented
in recent times have advanced the economic development of regional Victoria. A selection of
these initiatives is outlined below:
1) Customer Access Network Demonstrations Program (CANDP)
This program was created by the Victorian Government under its Regional Connections policy
that seeks to provide incentives for investment in communications infrastructure in regional
Victoria. The CANDP provides financial support of up to $1 million per project, with in-kind
contribution from applicants, and specifically targets solutions aimed at providing innovative
approaches to addressing the “last mile” of the network. The CANDP has been successful in
stimulating investment in the following areas:
• Gippsland Region: Deployment of the high-speed CDMA 1xRTT mobile data
service on Telstra’s CDMA network. This was a joint initiative of the Wellington
Shire and Telstra Country Wide.3
• Castlemaine: Synchronous High Speed Digital Subscriber Line (SHDSL)
technology to provide increased Internet speeds. This project was driven by the
Bendigo Community Telco, in partnership with AAPT, Powercor Telecom and
Marconi.4
• Shepparton: A wireless CAN offering voice and data services to businesses and
consumers using Multichannel Multipoint Distribution Systems (MMDS). This
project was a joint initiative of the City of Greater Shepparton, Gmtel and
Comindico.5
• Pyrenees: Broadband services delivering Voice over Internet Protocol (VoIP),
videoconferencing and telemedicine from five hub centres. These services are to
be delivered by Omniconnect.6
3
“Broadband Access Boost for Shepparton Region”, Media Release from the Minister for Innovation,
August 29, 2003.
4
“CAN Delivers Broadband Competition to Castlemaine”, Media Release from the Minister for
Information & Communication Technology, July 18, 2003.
5
“Broadband Access Boost for Shepparton Region”, Media Release from the Minister for Information
& Communication Technology, Minister for Innovation, July 31, 2003.
6
“CAN Delivers Broadband Competition to Pyrenees”, Media Release from the Minister for
Information & Communication Technology, September 9, 2003.
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• Wodonga: CMDA 1xRTT and Broadstorm Wireless Broadband technologies will be
introduced to deliver mobile broadband services to the Wodonga region. This
project involves a consortium of the City of Wodonga, Murray River Regional
Telecommunications Company, Murray Regional Development Board, SPTel,
AAPT and Phone Vision.7
Telstra notes that its success in obtaining funding to provide CDMA 1xRTT technology in the
Gippsland region led to this technology being deployed earlier than might otherwise have been
possible. The success of this program also meant that Victoria was the first State in which this
technology was fully deployed throughout the entire CDMA network. Thus, the benefits of this
State Government’s funding extended beyond those anticipated by this project and provided
regional Victoria with major flow-on benefits in terms of infrastructure investment and service
availability.
2) Victorian Government’s “Health Smart” Strategy
Telstra Country Wide has been working with the Victorian Health Alliances under the Victorian
Government’s " Health Smart " strategy for the past 3 years. As a result of this relationship,
Telstra Country Wide has developed new broadband solution offerings and accelerated the role
out of others to ensure the delivery of telecommunications for the provision of Regional Health
Care Services. Once deployed, these technologies are also available for the broader
community. To date, Telstra Country Wide has formalised agreements with the Hume, South
West, Gippsland, Loddon Mallee and Grampians Rural Health Alliances.
As part of the Alliance agreements and ongoing negotiations, over 250 sites will have
telecommunication enhancements delivering broadband services. Using a range of access
technologies, sites will have access from 2 Mbps to 1 Gbps. CDMA 1XRTT wireless broadband
(Telstra Fast Mobile) has also been deployed across all health alliance areas. Telstra has
committed some $29M to this project thus far. This program has both accelerated the
deployment of broadband services into regional areas, as well as providing benefits to the
wider community.
Further details on the projects Telstra is participating in with the Health Alliances are described
below:
• Loddon Mallee Health Alliance: Extends from Kyneton, north to Echuca, west to
Mildura and the South Australian border and back to Bendigo in the east. This
project has provided broadband and data services, and allowed 10 exchanges to
be enabled with ADSL. Funding came from both the Federal Government’s
Coordinated Communications Infrastructure Fund (CCIF) and State Government.
• GRHANet (Grampian Regional Health Alliance): Covers the area from Melton to
Kaniva. This project will provide broadband services to 40 regional communities,
and allow approximately 25 exchanges to be enabled with ADSL. Significant
7
“$2.14 million Broadband Boost for Wodonga Region”, Media Release from the Minister for
Innovation, April 15, 2004.
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funding was obtained from the Federal Government’s National Communications
Fund (NCF) and State Government’s “Growing Victoria” initiative. Telstra notes
that GRHANet should be commended for the proactive role they played in
establishing the vision and scope of this network. Without GRHANet’s vision, this
project would never have delivered to the extent we see today.
• Gippsland: Covers the greater Gippsland area, providing broadband services into
many regional health centres.
• Hume: Covers the Shepparton, Wodonga and Wangaratta region, providing
additional broadband services.
• Southwest Alliance of Rural Hospitals: Covers the region from Geelong to
Warrnambool with an extensive range of broadband services and data products. It
should also be noted that this Alliance utilises other telecommunication providers
for the Health network.
A common feature of these initiatives is that they are designed to promote competition and
innovation, and provide opportunities for partnerships between communities and infrastructure
providers. Governments that support such ‘demand aggregation’ models, which provide
incentives for investment that might not otherwise be made, should ensure that the most
efficient economic outcomes are obtained through the application of the policy principles
outlined previously. In particular, it is important that such schemes operate in a competitively
neutral manner, to allow the most effective and efficient solution to be selected from the entire
pool of potential service providers. The exclusion of some providers from such schemes will
reduce the chance of obtaining the best outcome for society [the community?], and generally
lead to sub-optimal outcomes.
Higher Bandwidth Incentive Scheme (HiBIS)
While this is a Federally funded scheme, it provides a useful example of how Government
support for investment can deliver benefits to regional communities. HiBIS provides incentives
for service providers to invest in broadband technologies through the provision of subsidies for
each customer connected in an area that did not previously have access to a broadband
service. This has resulted in Telstra being able to provide ADSL at exchanges earlier than
would otherwise have been commercially viable. Since the introduction of HiBIS, by September
2004 164 additional exchanges had reached the “trigger point” for ADSL provisioning earlier
than would have been possible without the HiBIS subsidies. 38 of these exchanges are located
in regional Victoria. The exchanges that will be enabled as a result of HiBIS are in addition to
other sites that have been provisioned with ADSL as a result of specific funding initiatives by
the Victorian Government under the Health Alliance arrangements discussed above. Over the
next few years, Telstra expects that HiBIS will continue to facilitate the early deployment of
ADSL services in regional Victoria. This scheme operates in a competitively neutral manner, as
all other carriers are able to provide broadband services through ADSL or other technologies,
and are able to purchase wholesale ADSL services from Telstra in exchanges that are
upgraded as a result of HiBIS support.
Telstra submits that the policy principles outlined in Section 2 require any attempts to develop
and support competition in regional Victoria to be properly assessed to ensure that policy is
implemented in an effective, efficient and economic manner, and to protect the long-term
interests of consumers. Telstra believes that this requirement should apply to any targeted
Government funding programs that promote investment and competition.
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Telstra recognises that this Inquiry is an ongoing activity that will evolve as more information
and opinions are gathered. If further information or clarification is required by the Inquiry
resulting from this submission, Telstra is happy to assist the Inquiry in whatever manner is
appropriate.
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