The Australian Competition and Consumer Commission (ACCC) released a discussion paper in early March 2018 as part of its public inquiry process to determine whether its declaration of the domestic transmission capacity service (DTCS) under Part XIC of the Competition and Consumer Act 2010 (Cth) (CCA) remains appropriate in light of changing market conditions, including arising from the National Broadband Network (NBN) rollout. If the ACCC determines not to continue the declaration beyond its current expiry of 31 March 2019, or limit the scope of the declaration, this will represent an example of where the NBN rollout, rather than resulting in increased regulation in the telecommunications sector, has assisted in reducing regulation.
What is a transmission service?
Transmission services are services for carrying large volumes of communications traffic (including voice, data and video) between 2 points. Transmission services are typically required for the delivery of telecommunications services. Transmission services are, for example, required by a retail service provider to carry communications traffic between the NBN points of interconnection (PoIs) and the points of presence (PoPs) on that provider’s network to allow the provider to supply services to its customers.
How are transmission services currently regulated?
Of course, not all telecommunications companies own or operate the transmission networks necessary to provide the transmission services they need. Therefore, many such companies need to purchase wholesale transmission services.
The ACCC has declared the DTCS under Part XIC of the CCA. This is a high capacity transmission service (described in a technology neutral manner) used to carry data between network nodes that meets certain criteria (for example, the service must be a point to point service and a wholesale input into other services). The declaration is currently limited to specific geographic routes. The carriers and carriage service providers that supply the declared DTCS must make that service available to access seekers on the terms required by Part XIC of the CCA.
The rationale for the declaration, first made in 1997, was to provide access to capital intensive infrastructure necessary for communications service delivery. This was determined to promote the long term interests of end users by increasing competition and ensuring the economically efficient investment in and use of infrastructure. The ACCC has kept the declaration in place since that time (though it has changed its geographical application) as, to date, it has remained of the view that it would be economically inefficient to require telecommunications companies to duplicate existing infrastructure and also as transmission services remain a critical input for the delivery of most telecommunications services. Competition is a key concern, given that the ACCC has perceived Telstra remained the dominant supplier of transmission services, particularly in regional areas.
ACCC’s views on the state of competition and the need for the declaration
Over time, the ACCC has removed the DTCS declaration from geographic areas where it is satisfied there is effective completion. In undertaking its inquiry now, the ACCC is of course again focussed on the issue of competition in this market.
The ACCC noted in its discussion paper that there has been significant investment both by Government and the private sector since the last declaration inquiry in 2014. For example, there has been, in addition to the ongoing rollout of the NBN, the following investments:
- Vocus, TPG and Optus have connected to almost all NBN PoIs.
- TPG has agreed to roll out dark fibre to 3,000 mobile sites owned by Vodafone.
Consolidation in the telecommunications sector has allowed each of Optus, TPG and Vocus to extend the geographic reach of its transmission network. This, together with the investment referred to above, has meant that the DTCS market is now dominated by four companies, Telstra, Optus, TPG and Vocus. The rollout of the NBN has also meant that services have been concentrated at points where communications traffic is handed over from the NBN to transmission providers.
Turning then to look at demand, the ACCC’s discussion paper notes there have also been significant increases in demand for higher capacity transmission services. This reflects an increasing demand for retail communications services.
The ACCC is considering, in light of these changing market dynamics, whether it remains in the long term interests of end users to continue the DTCS declaration in either its current or a modified form following its expiry date in early 2019. Indications from the discussion paper released by the ACCC are that it would be willing to further limit the geographical boundaries of the declaration.
Timing for completion of the inquiry
Comments on the ACCC’s 5 March 2018 discussion paper are due by 13 April. The ACCC may, following consideration of submissions, undertake further smaller inquires. It will then release its draft report and consult further on that. The ACCC has indicated the inquiry will continue until the expiry of the current declaration.