Ministers for the Department of Communications and the Arts

The Hon Paul Fletcher MP

Former Parliamentary Secretary
to the Minister for Communications

Second reading of Telecommunications Legislation Amendment (Consumer Protection) Bill 2013

14 February 2014

Mr FLETCHER (Bradfield—Parliamentary Secretary to the Minister for Communications) (12:29): I am very pleased to rise to speak on the Telecommunications Legislation Amendment (Consumer Protection) Bill 2013.

It might be said that the rather detailed measures contained in this bill are of interest to only a small section of the community. But both the member for Greenway and I do form part of that small section of the community. More broadly, these changes will, as I seek to explain, be of benefit to telecommunications consumers.

The measures in this bill are ones that I look at with some interest, having spent a reasonable proportion of my professional life engaged in the area of telecommunications regulation. Indeed, I was working as an advisor to then Howard government communications minister, Senator Richard Alston, at the time that the act which is proposed to be amended by this bill first went through the parliament. Subsequently, I had the opportunity to serve on the board of the Telecommunications Industry Ombudsman, an organisation which is the subject of key provisions of this bill. I also had the opportunity to head up the regulatory affairs function at Optus, the second-largest telecommunications company, where participation in the code development process—another key subject area of this bill—was part of our daily work.

Against that backdrop, I want to comment on the measures contained in this bill, which do several things. Firstly, they amend the Telecommunications (Consumer Protection and Service Standards) Act 1999 to strengthen the effectiveness of the Telecommunications Industry Ombudsman (TIO) scheme. Secondly, they streamline the industry code process in the Telecommunications Act 1997. They also enhance the operational efficiency of the Do Not Call Register Act 2006.

I want to make three points. There is a heavy element of self-regulation in the telecommunications sector—to make the regime as flexible and adaptable as possible. But self-regulatory arrangements can develop some rigidities, and this bill seeks to correct some of those. There is more to do on regulatory reform and it is a major priority for this government in the communications sector.

Let me turn then to the first proposition about the importance of self-regulation in the telecommunications sector in Australia. The broad legislative framework under which the sector presently operates took effect on 1 July 1997. There is a heavy self-regulatory framework under that regime. A key reason is that the sector is so fast moving—detailed legislation prepared by parliamentary counsel can easily get out of date. To give just one example: 16 years ago, the notion of voice over IP as a mainstream technology for voice would have been fanciful. Today there are over four million Australians using VOIP services.

It is because of this need to be constantly adaptive to the extraordinary rate of technological change in this industry that the regulatory regime applicable to telecommunications makes very extensive use of self-regulatory codes. These codes are developed by groups of industry participants under the auspices of the Communications Alliance—again, a self-regulatory body—and are ultimately registered with the Australian Communications and Media Authority and, once registered, they have the force of law.

They deal with a wide range of matters, including consumer protections, technical matters, and operational and interoperator arrangements. So code making is a vital and routine part of the way the industry operates and regulates itself in a very fast moving area. But there is a problem in the current process by which codes are made. As the legislative framework currently operates, there is no scope to make minor amendments on a stand-alone basis to the self-regulatory codes in the telecommunications sector. Instead, under the current process, the only way to make a change is for the developers of the code—that is, all of the multiple parties across the industry—to review the code in its entirety. Even if you wish to make minor changes or, indeed, urgent changes, you must go through, as the law presently stands, the full process of remaking the code, which takes two to three years given the number of parties involved and given the consultative process that is involved. So it is no surprise that telecommunications carriers have been frustrated by their inability to make minor changes to industry codes to ensure consumer protection obligations across industry are kept up to date.

Similarly, the Telecommunications Industry Ombudsman arrangements also involve a high degree of self-regulation. The Telecommunications Industry Ombudsman is an industry funded complaints scheme. Historically, it has been governed at two levels, a board and a council—both have a mix of industry and consumer sector representation. When a complaint is made by a customer, there is a tiered process of investigating that complaint with the service provider. As the investigation becomes more complex and if the matter is not resolved, the service provider is charged an amount which increases as the complaint proceeds to a higher tier. It is a strong incentive for the carrier or service provider to resolve the matter. So it is a powerful mechanism for using the price signal to communicate to telecommunications carriers when they have a problem, particularly a systemic problem.

Over the nearly 20 years now that the system has operated, a range of issues have generated particular systemic problems. A good current example, recently cited by the CEO of Optus, Kevin Russell, concerns bill shock in relation to data charges. Mr Russell said:

The notion that a 16 year old can rack up a $3,000 bill in the space of a week, or that travellers can return home with over $22,000 in international roaming charges is unacceptable. It's not an answer to say people have choices if the choices aren't great.

He went on to say:

It's no wonder Australians are unhappy with our industry. Almost one million complaints to the Telecommunications Industry Ombudsman about bills and customer service can't be wrong.

Optus is tackling these issues head on, by cutting our reliance on data breakage fees and unfair roaming charges.

I should again disclose for the record that I am a former employee of Optus.

Mr Russell's comments are a powerful demonstration that when charges paid to the Telecommunications Industry Ombudsman by a carrier or a service provider start to spike, it gets the attention of senior management, who ask, 'What do we need to do as a company to fix this and get complaints down?' I am certainly not saying that the system is perfect; no human institution is. But at its core it has worked effectively as a way to put a focus on problematic issues and to do so in a self-regulatory fashion—that is, without necessarily requiring the involvement of government.

While self-regulation is a central principle, self-regulatory arrangements can develop rigidities over time, and a key objective of this bill is to address some of the rigidities that have emerged. In my maiden speech I discussed the balance between rules being set by government and what the private sector should do. I said:

To me, the sweet spot in public policy is when government identifies the objectives and sets ground rules and incentives to achieve those objectives—and then gets out of the way to let individuals and businesses do the work.

I continue to believe that is a good principle but, as we have seen, there is a flaw in the present self-regulatory arrangements when it comes to codes, because there is presently no capacity to make minor modifications to codes. Similarly there is a need for some finetuning in relation to the arrangements governing the Telecommunications Industry Ombudsman. In particular, the amendments contained in the bill will allow codes to be varied through a streamlined process. That process will be similar to that for developing industry codes, but it will be more streamlined. One of the other changes is that code developers will be required to publish submissions. That will improve the transparency and accountability of the code development and review process.

In relation to the Telecommunications Industry Ombudsman, the amendments in the bill are designed to keep the Telecommunications Industry Ombudsman scheme in line with best practice for industry-run external dispute resolution schemes. This will be done by establishing a set of framework principles which will clarify the role of the TIO scheme and its expected standards of operations. The amendments will also introduce periodic, mandatory, independent and public reviews of how the Telecommunications Industry Ombudsman scheme is operating. These amendments will help to keep the TIO operating as an effective example of industry through its own efforts to respond to consumer complaints rather than relying on a process of direct government regulation.

The final point I want to make is that while this bill shows some encouraging progress towards lightening some of the burden of red tape and regulation on the communications sector, there is considerably more to do. When the Howard government introduced the Telecommunications Act, which took effect in 1997, it brought in a new period of competition in telecommunications. But it is timely now to look at the weight of the regulatory burden on this sector, just as the Abbott government is looking at the weight of the regulatory burden across all sectors of business. This government has made a strong commitment to reduce that regulatory burden. Indeed, we have set a very ambitious goal across government that by the end of our first term we will have reduced the cost to Australian business of regulation and red tape by $1 billion. In the communications portfolio, both Minister Turnbull and I are very focused on the importance of regulatory reform. The communications sector is, after all, highly regulated. The current regulatory framework is fundamentally based on a 1990s world of relatively stable technologies and business models which placed great emphasis on the predominance of the fixed-line network—which was certainly a valid assumption at the time. Since that time, of course, there has been a steady accretion of layer upon layer of rules and regulations. Some of these rules and regulations are important for facilitating competition but others are not of such evident value in 2014. It is timely to ask whether the policy objectives underpinning particular regulatory measures in the communications sector remain valid; if they do not, the case for those regulations being retained is very difficult to see.

We have commenced quite an extensive consultation process with the communications sector. A letter has been sent to participants right across the industry and some very good ideas have already been received from industry participants in relation to the reduction of red tape. This is a high priority. The coalition's first 'regulation repeal day' is coming up in March, and we expect at that time there will be measures in relation to communications included in the legislation which is before the House.

The coalition is determined to reduce the regulatory burden across the economy, and there is scope for the communications sector to share in that. The measures contained in this bill are improvements which will go some way towards making the self-regulatory arrangements which presently exist more flexible. But there is certainly more to do and the Abbott government is determined that the communications sector as well as other sectors of the economy will benefit from unnecessary regulation being removed, allowing greater efficiencies and less red tape so that business can get on with doing what it does best: serving its customers and serving Australians.

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