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Ian McGill

Ian McGill, Partner, Allens Arthur Robinson

I don't know about anybody else but I am totally outraged.  The reason for my outrage is that it should be front page news, but the Standing Committee on Communications, Information Technology and the Arts chaired by one Christopher Pine reported on the 11th November 2002 and has there been a government response? Has there been anything? I think there has been silence. It is outrageous. I mean who cares really, but that report was actually extremely important in what it said and recommended, for changes to the law to permit the disruptive technologies that other speakers have referred to. The law really doesn't have too much influence on this particular debate but the law can operate, the regulation can operate, to distort markets and to distort competition outcomes and perhaps to distort what we all agree should be in Australia's national interest. I wanted to address one of those distortions and perhaps a couple of solutions along the way.

Reference has been made by Peter Darling and Stephe Wilks to the fact that if you want the ultimate in broadband technology then you need fibre to the curb, fibre to the home.  It provides an enormous bandwidth.  Whether you are demand-side or supply-side really is not the point. The fact is that that sort of bandwidth might enable demand to exist or new applications to be developed but you are not going to get fibre to the curb in that scale of investment without some sort of government intervention. 

I am racking my brains for examples of where government has intervened in major infrastructure projects such as this to provide investment conditions or investment certainty or tax regimes to permit an investment of that scale.  The government has the ability to affect that sort of outcome, and so does regulation. A network of that dimension and the cost of it will be affected by access regimes.  For example, an access regimes under the Trade Practices Act 1974 (Cth) may have to have safe harbour provisions to enable investors to recoup the investment in such a network.  So that is where the law could intercept in relation to the establishment of such a network which I think the previous speakers who are much more expert than me agree is the best way to provide broadband to the home.

Let's just come back to reality.  The Government is not going to intervene in that sort of way in the foreseeable future, nor is it foreseeable that the carriers will invest in that scale at the moment because in the case of Telstra there is no red ink but there certainly isn't much appetite for capital investment and I am sure the same goes for Optus.

So we put the logical solution to one side and just examine the other technologies that are available to provide broadband to the home and broadband to business and the law is doing everything that it can to ensure that there is competitive neutrality, to ensure that there is competition between platforms, competition between operators.

In Australia I wouldn't be so bold as to mark a score card at the moment but everything in the legislation the way things are stated, the government's interest in this sector, the policy settings look right.  It is just the detailed implementation of it which can create discontinuity. One example has been put: that the Unwired technology that will shortly come to market is the first real competition to Telstra's final mile.  If that is so, then it is somewhat ironic that Telstra has had more than 15 years to recover the cost of its investment and the next greatest thing to compete in that final mile for broadband access will have less than 15 years to recoup its investment. It is because the licence that it has to operate under is a spectrum licence which has a fixed term of 15 years. Under the telecommunications legislation there is absolutely no expectation of renewal of that licence.  It is put in these terms: that unless the public interest demands it, the licence is re-auctioned. Now it is possible that when you closely examine the Unwired prospectus, detailed financial forecasts will demonstrate that there will be payback within x number of years, but I guarantee there will be no forecasts in that particular prospectus.  That creates a little bit of a discontinuity so I will go back to my original tongue in cheek outrage. 

Christopher Pine's committee looked at this issue and recommended to the government that a very hard look be given to the Telecommunications Act 1997 (Cth) and in particular to the licence reallocation and the end of term provisions, and the ACCC came up with a sensible framework for the renewal of spectrum licences.  Unless somebody can tell me otherwise, I do not think there has been any amendment or any response by the government to that committee's report.

Another way that the law can impact on these technologies before we reach Nirvana is in the area of wireless local access networks.

The Telecommunications Act.  Ladies and Gentlemen, this is really not very interesting I know but I am a lawyer and I can't help it.  The Telecommunications Act is a very blunt instrument.  The Act is expressed to be technologically neutral, it applies to the provision of services. It attaches its obligations onto things called "network units". Network units include radio transmitters and they include the types of radio transmitters that are referred to in some of the wireless local access network technologies, hot spots that you find in internet cafes and some of the more sophisticated technologies out there require a licence.  Unfortunately the Telecommunication Act is set up with this in mind - to regulate complex core large networks. It is not set up to regulate simple networks that nevertheless are doing a great public good, such as the internet for example, so that we can get access by our PCs to the internet while we are travelling. Those businesses exist but for many of them they have to be licensed as carriers if they own the transmitters, and if they are actually using capacity leased from a carrier then they are subject to quite onerous carriage service provider obligations and a whole raft of legislation including the access regimes that I referred to.

Again I will return to my original point of outrage.  The Pine committee recommended that we look at a differential licensing regime for some of these technologies, to remove some of the more onerous regulatory requirements that apply to carriers, and also frankly to exempt some types of wireless hot spot technologies from the whole regime.  In fact, I should give the government some credit, they actually did exempt certain types of technology that would have been under a wire line regime exempt, the same exemption was applied to a wireless system.

So I think we have got to judge the success or otherwise of broadband in Australia and broadband access in Australia by a number of measures.  One of those measures has to be availability of service, at a reasonable price, good competition between operators, competition between platforms, a regulatory regime that doesn't distort investment choice and it appears to me that at least in the wire line situation in the bungling of the local loop are subject to what Stephe Wilks said about the pricing. It looks as though not 1000 flowers bloomed in the provision of XDSL type services, but certainly 10s of them have bloomed; whether they are going to be successful or not only time can tell, it is not the role of a lawyer or government to determine those sort of outcomes. That looks a reasonable report card on the wire line front, on the copper network.

As far as radio is concerned, the wireless local access networks report card is not so good. There is a possibility for too much regulation to distort investment choice. So far as wireless local law replacement technology is a concern such as Unwired, there is a distinct possibly that the licensing regime is completely inappropriate for somebody like Unwired to mount a credible long term competitive threat to Telstra. 

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