Vertigan panel lays out path to less telecommunications regulation
1 October 2014
A landmark report to the Government on the telecommunications industry has laid out a path to a less regulated more competitive market, consistent with the regime that applied to the sector prior to the National Broadband Network.
The final report from a panel of experts led by Dr Michael Vertigan AC includes 19 recommendations for market-based reforms encompassing industry structure, infrastructure-level competition, service provision and market regulation.
The panel is critical of many regulations introduced between 2007 and 2013 under the Labor government, and argues the NBN is a risky undertaking that should face increased competition.
The Vertigan panel's Market and Regulatory Report is its third and final report.
It follows the panel's Cost-Benefit Analysis of Broadband released in August and Section 152EOA Statutory Review of telecom industry access rules released in July.
The Government welcomes the work of the Vertigan panel and its reminder of the value of increased competition and greater private sector investment in infrastructure.
The panel's final report provides a roadmap that if carefully implemented over time will reduce risks currently borne by taxpayers and lead to a more efficient and sustainable structure of market regulation.
But the Government is also mindful of its election commitment to complete the NBN as quickly and inexpensively as possible; of the value in minimising industry uncertainty; and of large losses for taxpayers and the Budget that would result from implementation of several of the panel's recommendations regarding the NBN.
For these reasons the Government has decided to make the following initial response to several of the Vertigan panel's recommendations:
- While disaggregation of NBN Co's business units (as the panel recommends) after the network is complete cannot be ruled out, now is not the time. Breaking up NBN Co would distract its management and delay the provision of high-speed broadband to all Australians.
- Amending existing laws governing broadband networks that compete with NBN Co (as the panel has also proposed) so they are fair for all market participants will take time and inevitably involve uncertainty. In the meantime competing vertically integrated networks which do not provide wholesale access to retail service providers could undermine the level playing field for retailers. Therefore the Government is consulting industry on a carrier licence condition to ensure maintenance of the level playing field originally intended by the existing legislation.
- The panel recommends that NBN Co recover its costs of deploying fibre in new housing developments in full, as a means of levelling the playing field with private sector infrastructure deployment companies. The Government recognises that the private sector has been placed at a substantial competitive disadvantage by the current arrangement, where NBN Co provides fibre infrastructure to new developments at no charge while the private sector has to recover costs in the normal way. The Government will consult with industry stakeholders with a view to finalising reforms in this area that address the imbalance in competition in a manner that is fair to all parties, including new home buyers.
The Vertigan panel's report explicitly acknowledges the practical constraints and costs the Government faces in reducing market regulation due to the complex rules and burdensome financial commitments left by Labor.
Practical constraints, including the characteristics of particular geographical markets, can prevent market‐based arrangements achieving fully desirable outcomes. So too can past decisions by governments and regulators, as those decisions leave a legacy which cannot be simply erased nor even necessarily overcome at reasonable cost. Any move to sustainable and efficient arrangements must recognise those constraints.
In line with the recently released Harper Review of competition policy, the Vertigan panel recommends the creation of a new network industries regulator to oversee the pricing of access to telecommunications networks, replacing the ACCC. It also urges numerous updates to rules on competition and access.
The Government will consider the panel's broader report in a rigorous and methodical manner prior to making a comprehensive response. This will include seeking the views of stakeholders and taking care to understand and acknowledge the consideration of risks and costs that underpins each of the various recommendations.
It is the aim of the Government to provide its full response before the end of the year.
The Vertigan panel's work provides invaluable insights into the costs and benefits of providing broadband in Australia and options for the long term operation of the market.
The Government thanks the panel of experts: Dr Michael Vertigan AC (Chair), Ms Alison Deans, Professor Henry Ergas and Mr Tony Shaw PSM.
The Market and Regulatory Report and the Cost-Benefit Analysis are available online at www.communications.gov.au/broadband/national_broadband_network/cost-benefit_analysis_and_review_of_regulation/nbn_market_and_regulation_report
Media enquiries: Jon Dart, 0457 646 749, Jon.Dart@communications.gov.au