REGULATORY FOCUS NEEDS TO CHANGE – JANUARY 2000
In this editorial I would like to focus on some of the crucial regulatory issues that need to be resolved within the next few months. They are concentrated in two areas:
- Industry Regulations
- USOs
Industry Regulations
We have now entered the third year of deregulation. The new Act, which was developed in 1996, came into effect on 1 July 1997. At that point we made the following observations:
- The new Act relies on self-regulation, and it will depend on Telstra’s willingness to tolerate competition (there was at that time absolutely no indication that this would happen).
- The new Regulators will need time to get on top of all the issues. This could easily take a year.
- The new Act totally ignores convergence, which will be the key issue in the future.
When we did our first year review in July 1998, we highlighted that:
- Telstra had been extremely successful in delaying competition.
- The Regulators at that stage still had to make an impact.
- The Internet was now the key issue, not voice calls.
In December 1998 a range of regulatory initiatives were launched in the market and the industry began to hope that maybe competition under the new regime would work after all. Dozens of submissions were made by the industry over the 1998/1999 holiday period and the Regulators came back with their first reports on Interconnect, Local Access, Number Portability and Local Loop Competition.
By mid-1999, however, these high hopes were fading. Telstra fought against competition every inch of the way. Its army of lawyers, one of the largest in the country, was extremely successful because the government insisted the industry should rely on self-regulation
The situation worsened and in June 1999 the Minister stepped in and conferred extra powers on the ACCC to block Telstra’s delaying tactics.
However, up till now (early 2000) this has had little or no effect. Telstra is now involved in 32 arbitration cases, persisting with its successful delaying tactics, and we still don’t have a good interconnect and access policy; no number portability beyond some early initiatives; no mobile roaming and no competition in the local loop.
While I would place the blame for this squarely in the government’s province – it being the majority owner of Telstra and the ultimate ‘boss’ of the Regulators – criticism can also be levelled at some of the other players in the market.
Over the last decade I have often argued that the new telcos are on the wrong track, concentrating far too much on the traditional telephone services and basically copying the Telstra model in their own market approach. There is little or no marketing done and their level of customer service is not all that much better than the notorious Telstra service. While they had to spend a lot of time on the regulatory stuff, preparing submissions etc, they also tended to follow a traditional confrontational telecommunications model. Furthermore, sometimes they appear to be exhibiting attitudes very similar to those of Telstra. Some of the industry codes are bogged down in indecisiveness, while the rest of the world marches on – no, sorry, races past them.
The era of lengthy negotiations and bickering is well and truly over. The industry will have to learn to make decisions on the fly and finetune them while still running. The market and the industry is moving so fast that what appeared to be insurmountable issues are now of little or no relevance whatsoever two years later. Under the current process we are still involved in issues that are two or three years old and have long since lost their significance. This results in a lot of time-wasting by the ACIF and other industry bodies.
In conclusion, if the Regulators and the government are to retain any credibility at all the various regulatory initiatives need to be implemented within the next few months. As I have mentioned before, I can detect battle fatigue in the industry, with fewer and fewer people standing up against the ongoing delaying tactics and lack of action by the ACCC on processes, some of which have been going on for as long as two years.
By now we should be well and truly concentrating on the new world of broadband services, high-speed access, digital TV and datacasting – words which are still rarely uttered at the ‘traditional’ telecommunications industry meetings. At the same time industry bodies such as the AIIA and INTIA should play a far more leading role in the telco industry since the new world will be IT- and Internet-driven and not telco-driven.
Irrelevant and out-of-date USO Policies
Australia always seems to be at the back of the field. When the first round of deregulation occurred in the early 1990s, we ‘forgot’ to include the new service providers that in the end delivered more competition than the dupolist that was selected by the government to provide this competition. In the Telecommunications Act of those days the word ‘service provider’ did not appear once.
The next round of regulations followed in 1996. By that time the Internet had well and truly arrived and a few people, such as Professor Mark Armstrong and myself, strongly advocated inclusion of the new converging markets in the new Act. All to no avail. I tried to convince the new telcos to lobby with us on that issue, but everybody was far too busy with the good old telephone stuff. The Department of Communications, being the drivers behind the new Act, showed no interest whatsoever. Since broadcasting and Internet had nothing to do with their work on the telco policies they imitated the ostrich and stuck their heads in the ground.
Now the government’s ‘fire brigade’ is being called out daily to extinguish brush fires in the Internet, digital TV, datacasting and broadband areas, none of which are covered in a national policy or national strategy.
At the same time, as we have already mentioned, real implementation of the Act still has not begun. In the meantime the world is passing us by. The important communication issues have already shifted from the telephone over to the Internet, digital TV, datacasting and broadband services. If the government really wants to offer its citizens some state of the art communications services they will have to start including these services into their USO arrangements. It is ridiculous for us to be in the year 2000 and still to be talking about a telephone service that was a crucial focus during the mid-1990s. And now the ACA has argued that the government should increase the USOs from its current $280 million to $460 million. There are two reasons why this is ridiculous.
- Costs of telecommunications have dropped by 90% over the last decade and only 30%-35% of this has been passed on to consumers (approximately 60% to business users). Over the last year alone we have seen dramatic changes in local call prices. Within two years most call will be made via mobile phones, which are not covered by the USOs and the telephone network that is covered by the USOs will no longer deliver voice, as 90% of its traffic will be data communications and video based.
- Yet our USOs still mainly talk about telephone calls, and low-speed data on a more or less obsolete ISDN network. I think it is a great idea to upgrade the USOs, and even spend more money on them, but let’s get real and start talking high-speed communication access instead of telephone calls that will be free-of-charge to most users within the next 3 years.
And as for the bush – the new high-speed networks rely heavily on technologies that have to be installed very close to the users (fibre has to be installed within 1.5Km of users). In suburbia this might be fine, but there is little hope for high-speed networks to the bush, without a significant increase in the USOs.
The government has been talking for close to a decade now about how to organise the USOs. It is about time to bite the bullet and make their policies more relevant to its citizens. Furthermore the market is still monopolised by Telstra. For years the government has been talking about USO tendering processes, but once again we haven’t seen any action. Let us open this market up to innovative alternatives. True, there are problems regarding unravelling the Telstra network and interconnecting it with other networks and services, but let’s get started and solve these en route, rather than indulge in endless discussions, submissions, plans and reviews.
If the government is serious about full privatisation of Telstra then let us, the citizens of this country, also get serious and demand that before the government privatises Telstra it makes sure that all of us will have access to the information highway. At this stage Telstra can’t even deliver a reliable basic telephone service to large parts of our population – as evidenced in the regular ACA quality of service reports. So what hope is there of Telstra being able to deliver an information highway to all Australians?
Paul Budde
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