ACMA review: call to absorb competition function

By David Donaldson

Wednesday September 2, 2015

Chris Chapman
Chris Chapman

ACMA’s chair, Chris Chapman, is stepping down at the end of the year, giving an opportunity for Communications Minister Malcolm Turnbull to reshape the organisation unfettered, and the submissions published on Friday offered plenty of scope.

The Australian Communications and Media Authority should be replaced with a regulator combining its telecommunications, radio and broadcasting focus with the relevant competition functions of the Australian Competition and Consumer Commission, argues a submission by telecommunications giant Optus to the Department of Communications’ review of ACMA’s responsibilities.

The corporation proposes scrapping ACMA for a new style of regulator modeled on the United Kingdom’s OfCom, an independent, converged regulator covering telecommunications and broadcasting.

Optus argues that “the current regulatory structure in Australia is somewhat unique internationally. It combines elements of an industry specific regulator (ACMA) with elements of an economy-wide competition regulator (ACCC).” The result is a lack of strategic direction and consistency in decision-making.

A question of remit

ACMA, in its extensive submission, welcomed the review, stating: “The ACMA has, for a number of years, expressed its view that the current legislative structures that establish media and communications regulation in Australia are no longer optimal given the rapidly changing nature of these sectors. … A fundamental question for the review is whether there continues to be unique characteristics of the communications and media sectors that require a particular style of regulation and regulator.”

Emphasising that the pace of change and increasing dispersion of digital information technologies was blurring boundaries between industry areas, the authority argued that “the gap between the legacy legislative architecture and the complex networked environment that now characterises media and communications continues to grow.” Any future regulator would need to be given the ability to respond flexibly to issues of public policy that “are likely to arise in unanticipated ways”.

Optus also expressed concern that the current regulatory structure will struggle to keep pace with the speed of technological and business change. As new services displace many legacy regulated services, many of these services “are being delivered by new application providers that own little if any infrastructure and fall outside the existing categories of carrier and carriage service provider around which existing regulations are built,” said the provider.

The phone company was critical of what it sees as a lack of consistency in decisions under the present system. It argues the interplay between ACMA, the ACCC and the government of the day means decision-making can be unpredictable and subject to differing priorities for each case:

“An example is the process to set price terms and competition caps on spectrum allocations. The ACMA’s main objective is to ensure the efficient allocation of spectrum from a technical perspective. The ACCC provides advice on competition elements of any allocations. However, the Government’s objective is often to maximise revenue achieved at the auction. Quite often the three different priorities will give rise to different auctions rules that may be internally inconsistent. It is not clear to industry beforehand which one of the three approaches (technical, promotion of competition or revenue raising) will ultimately drive the terms of an auction. This conflict was evident in the Digital Dividend auction of 700Mhz and 2.5Ghz spectrum. A complex auction process designed to illicit true market value for the spectrum was undermined by a parallel decision to set high reserve prices.”

The shared purview between ACMA and the ACCC gives rise to a need for coordination between the two to avoid overlap. This absorbs further resources. “This can give rise to situations where the number of regulators in the room outweighs the number of industry participants. This need for coordination and can lead to delays in decision making and perceptions over regulation,” says Optus.

On the topic of overlapping obligations, ACMA wrote:

“Effective management of those boundary issues will be important to delivering effective regulation. Such arrangements can include measures such as creating concurrent jurisdiction in relation to specific legislation, formal memorandums to ensure efficient and coordinated action, and ongoing, informal communication between relevant agencies. Given the scale and speed of change in the sector, it is unlikely that such boundary issues can be solved once and for all by legislative action, as one gap or overlap is eliminated, another will arise. Flexibility to deal with boundary issues as they arise must be the preferred solution.”

To combat the potential for blurred lines of responsibility, ACMA suggested the review consider a new approach to outlining its remit.

“While the ACMA’s existing remit might simply be described by reference to the scope of the principal legislation it administers, an alternative way, better adapted to future challenges, might be to consider the key components of internet-enabled communications as a way to inform the future focus of regulatory intervention. In broad terms the five key enablers of an internet-enabled economy are: infrastructure; devices; services/apps; digital information/digital content; and users interacting with each of these elements.

“This approach has the advantage of moving beyond the ‘siloed’ structures of existing legislation. It enables some analysis of those public policy concerns that relate to each of those enablers and whether those issues should appropriately be addressed by a sector specific regulator.”

The regulator also raised issue with the conflicting powers to intervene:

“Each of the primary Acts covering communications and media regulation establishes separate powers of intervention, including the application of compliance and enforcement powers. The result is that there is no consistent framework against which particular matters of public policy concern are assessed for the appropriate form of intervention (primary legislation, mandatory standards, co-regulatory codes). Indeed some are internally inconsistent.”

The OfCom approach

According to Optus, the benefits of the British OfCom approach — which operates along the lines of a corporate company, with a board of directors that is the executive decision making body — are:

  • A single and consistent regulatory objective and set of principles that guide the decision-making and other activities of the regulator;
  • Increased resourcing and focus at the decision making level;
  • Setting of annual strategic priorities which are finalised and published following industry comment;
  • Provision for outside perspective in the decision making through inclusion of nonexecutive directors.

To combat the lack of consistency in decisions, Optus thinks “clear principles should be established against which regulation should be applied and similar to Ofcom it should publish an annual plan (developed in conjunction with industry) setting out its objectives and priorities for each year.”

But it argues “this should not been seen as a platform for a more hands-on and intrusive regulator. Quite the contrary, it should set a platform for more proportionate, targeted and more effective regulation. There should be a presumption against regulation unless this can be justified to deliver a net public benefit.

“In parallel to these structural changes, a new regulator should be given new powers to ensure that regulation is more targeted and less broad brush than at present and to undertake a stock-take of all legacy regulations. This would provide an additional opportunity to unburden the industry from much unnecessary regulation. ”

Opportunity for deregulation?

Telstra, meanwhile, argued for greater deregulation and self-regulation in its submission, stating “the current regime falls short of best practice and can be improved by making greater use of coregulation and self-regulation options.”

Lighter-touch approaches “often solve problems and deliver policy outcomes more efficiently as well as making the regulation more flexible and fit-for-purpose”, said the company.

“It appears that self-regulation has not been used more generally due to an apparent preference for stricter forms of regulation and a lack of confidence in industry being able to deliver and comply with self-regulation, which is most likely driven by the lack of an accepted framework for engendering such confidence.

“Confidence about expanding the use of industry self-regulation in Australia can be drawn from the New Zealand experience where the industry (via the New Zealand Telecommunications Carrier Forum) operates a self-regulation model that includes an industry administered compliance framework and covers a wider range of regulatory matters.”

The Australian Communications Consumer Action Network expressed concern, however, over the need to achieve an appropriate balance:

“A challenge for the communications regulator will remain getting the balance right between demand and supply side interests, and knowing when the market has delivered sufficient sustainability to allow for an evolution from regulation to co-regulation, from self-regulation to no regulation. Flexibility in the co-regulatory and self-regulatory regime of registered codes and guidelines is a tool designed to address this. The consequences of getting the balance wrong can be serious as demonstrated in the period of record high numbers of complaints and low levels of consumer trust prior to the introduction of the current Telecommunications Consumer Protections Code in 2012.”

ACCAN also warned about that regulators dropping the ball during any resultant period of restructuring could impact on consumers’ rights:

“Experience has shown that the upheavals involved in organizational structural changes are very resource intensive, resulting in a lessening focus on the core work of the organisation to the detriment of the public. For example, the merger of the Australian Communications Authority and the Australian Broadcasting Authority in 2004 occurred at the time when significant consumer detriment was occurring due to the unscrupulous practices of mobile premium service providers. The restructure led a change in approach to code development and regulation of the problem, giving rise to considerable delays in the introduction of the regulatory response that was needed to address the problematic industry behaviour. In the meantime, complaints about mobile premium services soared.”

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