ACMA review rejects PM’s preferred super-regulator model

By Tom Burton

Monday May 9, 2016

Australian Communications and Media Authority
Australian Communications and Media Authority

A departmental review of the Australian Communications and Media Authority has recommended against the Prime Minister’s preferred UK-style super communications regulator, proposing a new commission agency and calling on the government to overhaul outdated communications regulation.

The review by the Department of Communications and the Arts recommends the end of the technology-specific approach, instead recommending a layered approach. This would give it a wide remit looking at applications, content, devices, carriage, infrastructure. The ACMA currently administers specific rules for broadcasters, telcos and wireless operators.

The review which is now open for public consultation till June 10 found the ACMA performs well and has been efficient in its operations. “However, its remit, responsibilities and functions lack clarity and cohesion, and its regulatory and performance objectives are unclear,” the review report says.

“There is a lack of clarity as to decisions which are best made by the regulator and those which are policy decisions for the government, particularly in areas that are increasingly contested such as spectrum allocation. These have made the ACMA’s job increasingly difficult in making regulatory judgements and the allocation of its resources, resulting in some frustration for the regulator and the industry.”

The review said improvements could be made to the ACMA’s timeliness and transparency and consistency of its major decision making. The review was supported by a reference group of industry representatives and former regulators.

The review also recommends the end of the Authority governance structure, where the chair is also the CEO — a key factor in the Chris Chapman-era internal reforms. It recommends the chair continue to be held accountable for the agency, but that powers be able to be delegated to a CEO. The report also proposes a new full-time commission model, similar to the Australian Competition and Consumer Commission and the Australian Security and Investment Commission.

The report calls for the ACMA’s cyber safety and cyber security functions to be transferred to the Attorney General’s Department to allow these programs to be better integrated with the Australian Cyber Security Centre. It also recommended consideration be given to moving the spectrum revenue collection functions to the Australian Tax Office to enable more efficient  collection. The ACMA is the third or forth biggest revenue collector for the Commonwealth.

Keep separate from ACCC

The review was commissioned by former communications minister Malcolm Turnbull who was a strong advocate for an industry specific regulator, similar to the UK Ofcom model. In Australia telco pricing regulation is administered by the ACCC. The Prime Minister was fiercely critical of the ACCC’s role in supporting a fibre to the home NBN model. The ACCC has promoted an economic model that encourages ISP’s such as iiNet to use Telstra’s network by holding down the access price ISP’s pay. This arguably created a disincentive for Telstra to invest in upgrading its network, leading to the need for a new super fast network.

The government’s Harper and Vertigan reviews however proposed the status quo, with the ACCC maintaining control over communications pricing rules. The departmental review, however, also recommends a number of actions to improve current arrangements to support a competitive communications market into the future. These include:

  • Strengthening formal cross-consultation arrangements between the ACMA and ACCC;
  • An annual Statement of Expectations being provided to the ACCC specifically in relation to its telecommunications functions; and
  • Including a regulator principle in the ACMA Act to make sure the ACMA has regard to the impact of its decisions on competition, innovation and efficient investment.

Key extracts from the report

Change in Remit

“In an era where the distinction between the traditionally well-defined industries of telecommunications, broadcasting and online is now largely redundant and the business models and nature of the firms operating in the broader communications sector are rapidly changing, the Review proposes a change to the way in which the communications market and the remit of the regulator are conceptualised.

Instead, the Review considers that it would be more useful to describe the new communications landscape as a horizontal “stack” of services and activities, with each layer in the stack providing services to the layer above and concurrently depending on the layers below. The ACMA’s remit should span across all these layers. Although the layers are not always clearly distinguishable because they are deeply interconnected, the four broad layers are described below:

APPLICATIONS/CONTENT LAYER — This layer includes software such as applications that support additional functionality, including content and the ability to make voice and video calls. Increasingly, services such as voice can be seen as applications in all Internet Protocol networks. This layer also includes applications to access content, such as iView, Netflix, Presto, Stan and the content itself.

DEVICES LAYER — Devices are an essential means to access communications networks. Devices include televisions, radios, mobile phones and tablets.

TRANSPORT LAYER — The transport layer provides the intelligence needed to support applications and functionality over the network. Networking and routing protocols enable error-free transmission of the bit stream and provide for the quality of service. Technical standards also enable interoperability and any-to-any connectivity between different networks.

INFRASTRUCTURE LAYER — The infrastructure layer includes the passive infrastructure and electromagnetic mediums that support the transmission of raw bit streams over a physical medium.

Commission recommendation

The Review recommends retaining the ACMA as an independent statutory authority with a commission structure, where commission members make most substantive decisions. Such a model provides for a range of experience and expertise to be brought to bear on regulatory decisions in a robust but collegiate manner. The commission model would be strengthened by ensuring all members are appointed on a full-time basis and that the commission, as a whole, has a range of appropriate skills and experience. These arrangements are consistent with those covering the ACCC and ASIC in Australia.

 Consumer Regulation

The Review considers there are strong arguments that the unique complexity of communications products and services mean that it is appropriate to retain sectoral regulation to complement general consumer law. As a consequence, the ACCC and ACMA should retain their concurrent roles. In its response to the 2015 Regional Telecommunications Independent Review Committee, the Government proposed further consideration of the overall framework for consumer safeguards, to allow the Government to determine the appropriate regime to apply in the future.

Changed functions

The Review considers the majority of the ACMA’s current functions are appropriate and necessary to ensure its continued smooth and efficient operations. The Review recommends a small number of changes:

  • that the ACMA’s well regarded cybersecurity programmes (Australian Internet Security Initiative, cyber security news e-bulletin, phishing alert services and the spam and cyber security public awareness websites) be transferred to the Attorney-General’s Department to allow them to be better integrated with the Australian Cyber Security Centre;
  • that the Department and the ACMA develop shared strategies for international engagement and research and analysis, clearly delineating their respective policy and independent regulatory roles to avoid duplication and confusion and make the most of their shared skills and expertise;
  • that further consideration be given to the ACMA’s revenue collection functions to determine whether it may be more efficient for another body, such as the Australian Taxation Office (ATO), to undertake these functions;
  • that the ACMA explore greater opportunities for industry to self-regulate in areas such as technical regulation, number allocation and mature regulatory schemes (such as the Do Not Call Register);
  • that the Department undertake further work to explore the potential to expand the ACMA’s remit to take on certain classification functions currently administered within the National Classification Scheme in order to harmonise online and offline classification functions; and
  • compliance and enforcement of the Interactive Gambling Act 2001 be transferred from the Department and the Australian Federal Police to the ACMA.

Performance

That the ACMA undertake a range of measures to improve its timeliness and transparency, including reporting on steps taken to improve the transparency and consistency of its decision-making processes and, every two years, on actions to reduce regulatory burden

The Review concludes that the ACMA has performed well and efficiently in its operations, with steady improvements in important areas of business processes over the last ten years. It has developed sound approaches to regulatory issues and has a strong international reputation in areas such as spectrum management. It has pursued efficiencies in corporate and business processes and adjusted its structure as its resource base has declined over time. Its regulatory decision-making has been sound and supported by evidence.

The Review finds improvements could be made to the ACMA’s timeliness of decision-making, transparency of Authority decision-making processes, consistency of process for major rule-making and planning activities, and approaches to continuous improvement of the regulatory framework.

Regulatory reform

The regulatory framework has not kept pace with the seismic shifts in the sector in recent years. Only minimal changes were made to the underlying communications regulatory frameworks in 2005 when the ACMA was established, meaning that much of the current regulation of the communications sector is substantially more than 20 years old. While a reform process has commenced in some areas, with the Spectrum and Vertigan Reviews and the recent decision to examine telecommunications consumer regulation, including the USO, the ageing regulatory regime still maintains a distinction in many areas between delivery technologies which no-longer exist and places excessive emphasis on traditional broadcasting and telecommunications providers to achieve public policy outcomes.

Feedback from submitters and an examination of the underlying regulation administered by the ACMA demonstrates the regulatory regime is no longer fit-for-purpose. Public policy goals could be achieved more effectively and at a lower cost to industry if a more coherent and streamlined regulatory regime was established. A more flexible and technology neutral regulatory regime would also better support the communications sector achieve its full potential as an enabler of innovation and productivity growth across the economy.

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