Australian Competition and Consumer Commission v Telstra Corporation Ltd

[2010] FCA 790

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Telstra Corporation Limited [2010] FCA 790

Citation:

Australian Competition and Consumer Commission v Telstra Corporation Limited [2010] FCA 790

Parties:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v TELSTRA CORPORATION LIMITED (ACN 051 775 556)

File number(s):

VID 174 of 2009

Judge:

MIDDLETON J

Date of judgment:

28 July 2010

Catchwords:

TELECOMMUNICATIONS - application for pecuniary penalty, injunctions and declarations - breach of a condition of carrier licence - contravention of s 152AR(5)(c) of the Trade Practices Act 1974 (Cth) and s 68(1) and cl 17 of Sch 1 of the Telecommunications Act 1997 (Cth) — admission of breach by respondent — assessment of penalty — relevant factors to take into consideration in assessing quantum of pecuniary penalty - whether the same conduct– whether to grant an injunction — whether to make a declaration.

Legislation:

Evidence Act 1995 (Cth)

Federal Court of Australia Act 1976 (Cth)
Telecommunications Act 1997 (Cth)
Trade Practices Act 1974 (Cth)
Trade Practices Amendment (Telecommunications) Act 1997 (Cth)

Cases cited:

Australian Communications and Media Authority v WE.NET.AU Pty Ltd [2008] FCA 1530
Australian Competition and Consumer Commission (ACCC) v ABB Transmission and Distribution Ltd (No 2) (2002) 190 ALR 169
Australian Competition and Consumer Commission (ACCC) v Allans Music Group Pty Ltd [2002] FCA 1552
Australian Competition and Consumer Commission (ACCC) v Australian Safeway Stores Pty Ltd & Ors (1997) 75 FCR 238
Australian Competition and Consumer Commission (ACCC) v CC (NSW) Pty Ltd (No 9) (2000) ATPR 41-756
Australian Competition and Consumer Commission (ACCC) v Chubb Security Australia Pty Limited (2004) ATPR 42-041
Australian Competition and Consumer Commission (ACCC) v Fila Sport Oceania Pty Ltd (2004) ATPR 41-983
Australian Competition and Consumer Commission (ACCC) v Safeway Stores Pty Ltd (No 4) (2006) ATPR 42-101
Australian Competition and Consumer Commission (ACCC) v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618
Australian Competition and Consumer Commission v Rural Press (2001) ATPR 41-833
Cameron v The Queen (2002) 209 CLR 339
Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39
Ducret v Nissan Motor Car Co (Australia) Pty Ltd (1979) ATPR 40-111
L VogelandSon Pty Ltd v Anderson (1968) 120 CLR 157
Mill v The Queen (1988) 166 CLR 59
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
NW Frozen Foods v Australian Competition and Consumer Commission (ACCC) (1996) 71 FCR 285
Telstra Corporation Limited v The Commonwealth (2008) 234 CLR 210
Trade Practices Commission v Allied Mills Industries Pty Ltd and Others (No 4) (1981) 37 ALR 256; (1981) ATPR 40-241
Trade Practices Commission v Bata Shoe Company of Australia Pty Ltd (1980) ATPR 40-161
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076
Trade Practices Commission v Malleys Ltd (1979) ATPR 40-118
Trade Practices Commission v Prestige Motors Pty Ltd (1994) ATPR 4-359
Trade Practices Commission v Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091
Trade Practices Commission v TNT Australia Pty Limited (1995) ATPR 41-375
Universal Music Australia v Australian Competition and Consumer Commission (ACCC) (2003) 131 FCR 529

Date of hearing:

19, 20, 21, 22 April 2010 and 4, 5, 6, 10, 11, 12, 27 May 2010

Place:

Melbourne

Division:

GENERAL DIVISION

Category:

Catchwords

Number of paragraphs:

288

Counsel for the Applicant:

Mr N O'Bryan SC with Mr M O'Bryan

Solicitor for the Applicant:

Corrs Chambers Westgarth

Counsel for the Respondent:

Mr AC Archibald QC with Dr M Collins

Solicitor for the Respondent:

Mallesons Stephen Jaques

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 174 of 2009

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	TELSTRA CORPORATION LIMITED (ACN 051 775 556) Respondent

JUDGE:	MIDDLETON J
DATE OF ORDER:	28 JULY 2010
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.The parties confer for the purpose of agreeing upon minutes of orders.

2.The parties file any agreed minutes of orders on or before 4:00pm on 16 August 2010.

3.The parties file and serve any written submissions as to orders sought and not agreed (including orders as to costs) on or before 4:00pm on 16 August 2010.

4.The parties file and serve any reply submissions on a before 4:00pm on 23 August 2010.

5.The parties advise the Court on or before 4:00pm on 23 August 2010 whether they agree to the further orders being made upon the written submissions without the need for any further appearance.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 174 of 2009

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	TELSTRA CORPORATION LIMITED (ACN 051 775 556) Respondent

JUDGE:	MIDDLETON J
DATE:	28 JULY 2010
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

Application

1. In this proceeding the Australian Competition and Consumer Commission (‘ACCC’) seeks:

   (a)Declarations under s 21 of the Federal Court of Australia Act 1976 (Cth) (‘Federal Court Act’),

   (b)Pecuniary penalties under s 570 of the Telecommunications Act 1997 (Cth) (‘Telecommunications Act’),

   (c)Injunctions under s 564 of the Telecommunications Act and s 152BB and s 80 of the Trade Practices Act 1974 (Cth) (‘TPA’),

   in respect of two related categories of conduct engaged in by the division of the respondent (‘Telstra’) known as Telstra Wholesale. 

2. The first category of conduct involves the rejection of requests made to Telstra by access seekers for interconnection of their facilities with the facilities of Telstra at the Bulwer (WA), Carlton (VIC), Northcote (VIC), Paddington (QLD), Port Melbourne (VIC), South Perth (WA) and St Peters (SA) exchanges (‘the Seven Exchanges’).  

3. The second category of conduct involves the publication by Telstra of notices on the Telstra Wholesale website containing representations that there was no capacity on the Main Distribution Frame (‘MDF’) at the Seven Exchanges that could be made available for use by access seekers to interconnect their facilities (‘the Capped Sites Notices’).

   Telstra’s Admissions

4. Telstra has admitted, for the purposes of this proceeding, that by rejecting the requests for interconnection from access seekers in relation to the Seven Exchanges it has:

   (a)on 27 occasions failed to comply with s 152AR(5)(c) of the TPA and a condition of its carrier licence and contravened s 68(1) of the Telecommunications Act;

   (b)on 22 occasions failed to comply with cl 17 of Sch 1 to the Telecommunications Act and a condition of its carrier licence and contravened s 68(1) of the Telecommunications Act;

   (c)made representations to access seekers that were incorrect and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive contrary to s 52(1) of the TPA.

5. Telstra has also admitted, for the purposes of this proceeding, that by publishing Capped Sites Notices in relation to the Seven Exchanges between 1 September 2007 and 10 April 2008 it made representations that were incorrect and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive contrary to s 52(1) of the TPA.

6. The ACCC does not press any contraventions of law alleged in the Amended Statement of Claim (‘ASOC’) beyond those admitted by Telstra.

7. In addition to admitting the above contraventions, Telstra has admitted, for the purpose of this proceeding, the majority of the ACCC’s allegations of fact contained in the ASOC.  However, not all allegations of fact have been admitted.

   Penalty and Other Remedies

8. The parties are in dispute as to the level of pecuniary penalty that ought to be paid by Telstra under s 570(1) of the Telecommunications Act, and as to other remedial relief to be ordered by the Court.

9. Section 570 of the Telecommunications Act provides for the imposition of a pecuniary penalty in respect of a contravention of s 68(1) of the Telecommunications Act.

10. In determining the pecuniary penalty, the Court must have regard to all relevant matters, including:

    (a)the nature and extent of the contraventions;

    (b)the nature and extent of any loss or damage suffered as a result of the contraventions;

    (c)the circumstances in which the contraventions took place; and

    (d)whether the person has previously been found by the Court in proceedings under the Telecommunications Act to have engaged in any similar conduct.

11. The pecuniary penalty is not to exceed $10 million for each contravention.

12. A person is not liable to more than one pecuniary penalty in respect of the same conduct (see s 570(5) of the Telecommunications Act).

13. The Federal Court is also empowered to grant injunctive relief:

    (a)under s 152BB of the TPA in respect of contraventions of the standard access obligations;

    (b)under s 564 of the Telecommunications Act in respect of contraventions of that Act; and

    (c)under s 80 of the TPA in respect of contraventions of s 52 of the TPA.

14. The Federal Court also empowered to make declaratory orders (see s 21 of the Federal Court Act).

    RELEVANT STATUTORY PROVISIONS

15. Part XIC of the TPA sets out a telecommunications access regime. It was inserted into the TPA by the Trade Practices Amendment (Telecommunications) Act 1997 as part of a legislative package which included the enactment of the Telecommunications Act.

16. Section 3 of the Telecommunications Act provides that the main object of that legislation, when read together with Pt XIB and Pt XIC of the TPA, is to provide a regulatory framework that promotes:

    (a)the long-term interests of end-users of carriage services or of services provided by means of carriage services; and

    (b)the efficiency and international competitiveness of the Australian telecommunications industry.

17. It is also provided that the other objects of the Telecommunications Act, when read together with the TPA, include:

    (a)to promote the supply of diverse and innovative carriage services and content services;

    (b)to promote the development of an Australian telecommunications industry that is efficient, competitive and responsive to the needs of the Australian community; and

    (c)to promote the effective participation by all sectors of the Australian telecommunications industry in markets.

18. Section 152AB of the TPA provides that the object of Pt XIC is to promote the long term interests of end-users of carriage services or of services provided by means of carriage services. This is amplified in s 152AB(2) which states that, in determining whether a particular thing promotes the long term interests of end-users, regard must be had to the extent to which the thing has the following objectives:

    (a)promoting competition in markets for listed services;

    (b)achieving any-to-any connectivity in relation to carriage services that involve communication between end-users; and

    (c)encouraging the economically efficient use of, and the economically efficient investment in, the infrastructure by which listed services are supplied and any other infrastructure by which listed services are, or are likely to become, capable of being supplied.

19. A participant in the Australian telecommunications industry, like Telstra, is not only to be concerned with its own self interest.  As commented by the High Court in Telstra Corporation Limited v The Commonwealth (2008) 234 CLR 210 at p 228 [33] per Gleeson CJ, Gummow, Kirby, Hayne, Heydon, Crennan and Kiefel JJ:

    …

    The objects thus identified in the 1997 Telecommunications Act and in Pt XIC of the Trade Practices Act are wider than and different from that narrow self interest which, statute apart, is all that one participant in a market would ordinarily consult when striking a bargain with another participant in that market.

20. Under s 152AL, the ACCC may declare certain services for the purposes of the application of Pt XIC. The Unconditioned Local Loop Service (‘ULLS’) and the Line Sharing Service (‘LSS’) (to which I will return) were active declared services (as defined in s 152AR(2) of the TPA) under s 152AL.

21. Section 152AR sets out standard access obligations in respect of active declared services. As a consequence, Telstra has been required to comply with the standard access obligations set out in s 152AR(3)(a) and s 152AR(5)(c) in respect of the ULLS and the LSS.

    Defined Terms

22. The relevant statutory provisions use a number of defined terms.  For convenience, commonly used defined terms are as follows:

    Service provider is defined in s 152AC of the TPA and s 86 of the Telecommunications Act to mean a carriage service provider or a content service provider. Relevantly, a carriage service provider is a person who supplies a listed carriage service to the public (s 87 of the Telecommunications Act) which is a service for carrying communications between discrete points (s 7 and s 16 of the Telecommunications Act). The standard access obligations in s 152AR of the TPA apply for the benefit of service providers.

    Access seeker is defined in s 152AG of the TPA to mean, in relation to a particular declared service under Pt XIC of the TPA, a service provider who makes or proposes to make a request in relation to that service or who wants access to the service. In the present context, the terms “service provider” and “access seeker” can be used interchangeably.

    Access provider is defined in s 152AR(2) of the TPA to mean a carrier or carriage service provider who supplies a declared service. Telstra was an access provider in relation to the ULLS and the LSS.

23. Section 152AR(3)(a) provides that an access provider must, if requested to do so by an access seeker, supply an active declared service (in this case, the ULLS and the LSS) to the access seeker in order that the access seeker can provide carriage services and/or content services.

24. Section 152AR(5)(c) provides that if an access provider owns or controls one or more facilities, it must, if requested to do so by an access seeker, permit interconnection of those facilities with the facilities of the access seeker for the purpose of enabling the access seeker to be supplied with active declared services (in this case, the ULLS and the LSS) in order that the access seeker can provide carriage services and content services.

25. By virtue of virtue of s 62 of the Telecommunications Act and s 152AZ of the TPA, it is a condition of Telstra’s carrier licence that Telstra complies with the standard access obligations referred to above.

26. By s 61 of the Telecommunications Act, it is a condition of Telstra’s carrier licence that Telstra complies with the provisions of Sch 1 of the Telecommunications Act. By cl 17 of Sch 1 of the Telecommunications Act, Telstra must, if requested to do so by another carrier, give the other carrier access to Telstra’s facilities for the purpose of enabling the other carrier to provide competitive carriage services provided that:

    (a)the other carrier’s request is reasonable;

    (b)the other carrier gives Telstra reasonable notice that the other carrier requires the access; and

    (c)Telstra’s facilities were in place on 30 June 1991 or were not in place on 30 June 1991 and were not obtained after that date by Telstra solely by means of commercial negotiation.

27. Each Local Loop, MDF, Digital Subscriber Line Access Module (‘DSLAM’) and exchange building was a facility within the meaning of Pt XIC of the TPA and the Telecommunications Act. Further, in respect of the Seven Exchanges, the exchange building and land forming part of the exchange, the MDF within the exchange and the Local Loops terminating at the exchange were in place on 30 June 1991 or were not in place on 30 June 1991 and were not obtained after that date by Telstra solely by means of commercial negotiation.

28. By s 68(1) of the Telecommunications Act, Telstra is required to comply with the conditions of its carrier licence. Subsection 68(1) is a civil penalty provision (see s 68(3)). It is s 68(1) that has been contravened by Telstra which gives rise to the pecuniary penalties sought by the ACCC under s 570(1) of the Telecommunications Act. Section 570(1) enables the Court to order the payments of any pecuniary penalty to be made, in respect of each contravention, as the Court determines to be appropriate.

    FACILITIES INTERCONNECTION AND COMPETITION

    Technical Overview

29. This proceeding concerns requests by access seekers to interconnect their facilities with Telstra’s facilities within the Seven Exchanges in order to acquire the ULLS and/or the LSS and thereby supply telecommunications services to end-users in competition with Telstra.

30. The facilities of access seekers and Telstra that must be interconnected for this purpose are described in the Agreed Statement of Facts – Technical Overview dated 23 December 2009 (‘Technical Overview’). The facts in the Technical Overview have been agreed by the parties under s 191 of the Evidence Act 1995 (Cth).

    Use of Telstra’s PSTN to Supply Competing Telecommunications Services

31. Telstra owns and operates a public switched telephone network (‘PSTN’).  The PSTN is Australia’s largest nation-wide fixed line telecommunications network.  It is used, among other things, to provide retail and wholesale telecommunications services.  As at 30 June 2008, there were approximately 9.86 million fixed line services connected to the PSTN.

32. Telstra has been able to supply, and has supplied, telecommunications services (including voice telephony and broadband internet services) to end-user premises connected to the PSTN.  Broadband internet services supplied using Telstra’s PSTN are known as digital subscriber line (‘DSL’), xDSL or ADSL services (ADSL is an acronym for asymmetric digital subscriber line - ‘asymmetric’ refers to the fact that ADSL download speeds and capacity are much higher than upload).

33. Service providers have also been able to supply, and have supplied, telecommunications services (including voice telephony and ADSL broadband internet services) to end-user premises connected to the PSTN in competition with Telstra.  There are two primary means by which service providers have been able to supply those services.

34. First, service providers have been able to acquire a wholesale carriage service from Telstra and resell that service to the end-user. In respect of voice telephony services, the relevant wholesale carriage services supplied by Telstra to service providers include the Local Carriage Service (‘LCS’), the Wholesale Line Rental Service (‘WLR’), the Domestic PSTN Originating Access Service and the Domestic PSTN Terminating Access Service (each of which was an active declared service within the meaning of Pt XIC of the TPA). In respect of broadband internet services, Telstra has supplied service providers with the Wholesale DSL Service. When a service provider uses a wholesale carriage service supplied by Telstra, the service provider does not use its own facilities to effect the carriage of the communication; instead, the communication is carried by Telstra using its facilities.

35. Secondly, service providers have been able to acquire the ULLS or the LSS from Telstra.  The use of the ULLS or LSS by service providers is described in more detail below.  In summary, the service provider interconnects its own telecommunications facilities (typically a DSLAM and backhaul transmission capability) with the facilities of Telstra (the Local Loops which connect to a particular end-user’s premises) in order to supply the carriage service to the end-user.

1. I am prepared to accept that the competitiveness of the telecommunications services supplied by service providers, in terms of both price and quality, is affected by whether the telecommunications services are supplied using the ULLS/LSS or a wholesale service such as the LCS/WLR (voice) and the Wholesale DSL Service (internet).

2. The importance of the ULLS/LSS services in facilitating telecommunications competition in Australia was discussed in the determinations of the ACCC declaring the ULLS and LSS services respectively.  The ACCC’s final determination dated July 2006 concerning the declaration of the ULLS concluded that:

   In areas where xDSL technology is viable, the ULLS service is an important platform for competition in basic access, voice and broadband services.  In the absence of effective facilities-based competition and ULLS declaration, retail competition in customer access, voice and broadband services would be limited to service providers on-selling Telstra’s wholesale products.  Retail competition would be stifled as customers would not have the same degree of customer choice as is available via ULLS based competition.

   This view is supported by comments from the Competitive Carriers Coalition which states that ULLS allows competitors to differentiate their prices and products and reduce their reliance on Telstra.

3. The ACCC’s final decision dated October 2007 concerning the declaration of the LSS stated that:

   In practice the LSS has been used by internet service providers (ISPs) such as iiNet and internode to be first to market high-speed broadband services via ADSL2+ technology.  These access seekers have been able to fully utilise the functionality of the LSS to compete aggressively on the basis of high-quality, differentiated retail broadband offerings.  In turn, telecommunications providers, such as Telstra and Optus, have responded to these market developments by also offering ADSL2+ services to consumers.  Thus, LSS based competition has been effective in promoting rivalry, innovation and customer choice in the retail market for high-speed broadband services.

4. Telstra’s PSTN is not the only fixed line telecommunications network in Australia that is connected to residential premises, but it has the largest coverage of residential premises.  In addition to the PSTN, Telstra and Optus each own a Hybrid Fibre Coaxial (‘HFC’) network that is connected to numerous residential premises in Adelaide, Brisbane, Gold Coast, Melbourne, Perth and Sydney.  The Telstra and Optus HFC networks are able to be used to supply broadband internet services to the premises passed by the networks as an alternative to ADSL services supplied using the PSTN.  Neighbourhood Cable also operates an HFC network to provide broadband, pay TV and voice telephony services in the regional Victorian cities of Ballarat, Mildura and Geelong. 

   Facilities Interconnection

5. The ULLS and the LSS involve the use by access seekers of the copper wire pairs that connect end-users’ premises to Telstra’s exchanges.  The copper wire pairs are also known as Local Loops to which I have already referred.  The Local Loops form part of Telstra’s PSTN. 

6. In order to use the ULLS or the LSS, an access seeker must connect its own equipment to the Local Loop over which the service is to be supplied.  The equipment to be connected is typically a DSLAM.  This enables the access seeker to use the ULLS or LSS to supply voice and data communication services over that Local Loop.

7. The access seeker’s DSLAM is interconnected with the Local Loop over which the ULLS or the LSS is to be provided on the MDF in the exchange.  Accordingly, when an access seeker requests the supply of the ULLS or LSS in respect of a Local Loop connected to the premises of a particular end-user, the Local Loop is disconnected from Telstra’s network equipment (assuming the end-user was a Telstra customer at the time of request) and is connected to the access seeker’s equipment.  The technical steps involved are described in more detail in the Technical Overview.

8. MDF’s comprise an iron frame consisting of two sides, referred to respectively as the “equipment” and “line” sides, onto which termination blocks are mounted.  Local Loops typically terminate on blocks on the line side.  A pair of copper wires known as a jumper will then connect that line side block to another termination block on the MDF (usually, though not necessarily on the equipment side) which will be interconnected with the equipment of Telstra or an access seeker.  Termination blocks on an MDF are commonly referred to in groups known as “verticals” which are a single column of termination blocks running from the top of the MDF to the bottom.  Each termination block on the MDF can terminate multiple copper pairs.  Over the years, the density of termination blocks, that is, the number of wire pairs able to be terminated on a particular block, has increased as technology has improved.  For example, some blocks are able to make connections between 104 wire pairs, which means that 104 jumpers are able to be connected to that block and 104 Local Loops are able to be connected to that block, effecting a connection between 104 individual jumpers and 104 individual Local Loops.

9. In order to supply telecommunications services using the ULLS or the LSS on a commercial or economic basis, an access seeker must locate its equipment (such as a DSLAM) in or adjacent to Telstra’s exchange and run an interconnect cable from its equipment to a termination block on the MDF.  To do this, an access seeker must acquire various services from Telstra including the right to access Telstra’s exchanges to install DSLAMs and interconnect cables to termination blocks on the MDF (which services are typically referred to as Telstra Exchange Building Access services (‘TEBA services’)).  The space within which DSLAMs are located within exchanges is commonly referred to as “rack space”.

   Ordering and Provisioning Procedures

10. Telstra has supplied the ULLS and the LSS and TEBA services to access seekers pursuant to agreements which included agreements titled Customer Relationship Agreements (‘CRAs’) and Facilities Access Agreements (‘FAAs’).  These documents are in a relatively standard form.

11. Relevantly, the CRAs and the FAAs set out the ordering and provisioning procedures to be followed by access seekers to access Telstra’s exchanges for the purpose of installing and interconnecting equipment, including DSLAMs and interconnect cables.  In summary, those procedures are as follows:

    (a)If a DSLAM is to be installed in the exchange building, access seekers must submit a Preliminary Study Request (PSR).  If a DSLAM is to be installed adjacent to the exchange, an access seeker must submit a Duct Study Request (DSR) or an External Interconnection Cable (EIC) Study Request rather than a PSR.  The PSR, DSR and EIC Study Request (as applicable) must specify, amongst other things, the number of block positions on the MDF required by the access seeker to interconnect its facilities.

    (b)Telstra is required to undertake a study based on the information contained in the PSR, DSR or EIC Study Request (as applicable) and advise the access seeker whether the access requested is able to be granted and, if not, whether alternative access may be suitable.  Telstra must use reasonable efforts to do this within 10 working days.

    (c)If Telstra indicates that access is likely to be granted, the access seeker must submit a Design and Construction Proposal (‘DCP’).

    (d)Telstra reviews the DCP and advises the access seeker whether it is approved for implementation or approved subject to conditions or rejected.  If reasonably practical, Telstra must do this within 15 working days.

    (e)If the DCP is approved, the access seeker may undertake the construction works described in the DCP at the exchange.

    (f)Following the completion of the construction works, the access seeker must submit to Telstra a Joint Completion Inspection (‘JCI’) Request following which Telstra and the access seeker conduct a joint inspection of the construction works to ensure that they are in accordance with the DCP and satisfy all of Telstra’s technical and safety requirements.

12. Telstra’s admitted contraventions involved rejections of PSRs, DSRs and EIC Study Requests submitted by access seekers in respect of the Seven Exchanges.

    Exchange Capacity Management

13. Telstra’s exchanges have physical constraints.  Importantly, such constraints are recognised in the CRA’s and FAA’s.  In order to supply TEBA services to an access seeker, there must be rack space available, or able to be made available, in which to locate the access seeker’s DSLAMs (either within the exchange or on land adjacent to the exchange).  There must also be block positions available, or able to be made available, on the MDF to enable the access seeker to install termination blocks and run interconnect cables from its DSLAM to the termination blocks (thereby enabling interconnection with Local Loops).

14. In order to record and manage the use of MDFs in its exchanges, Telstra created drawings using a system called CADLINK that depicted the layout of the MDFs including the termination blocks mounted on the MDF and their use (Cadlink drawings).  Cadlink drawings depicted the use of block positions on verticals on the equipment and line sides of MDFs, including whether the block positions were vacant, in use or reserved for future use.  On occasions, the Cadlink drawings also indicated whether block positions held redundant equipment.

15. The Cadlink drawings for each of the Seven Exchanges indicated the available MDF capacity at the time that access seekers requested interconnection.  However, the Cadlink drawings were not always accurately maintained by Telstra, a matter to which I will return. 

16. Since at least 21 September 2006, Telstra’s practices and policies in relation to the management of the capacity of MDFs in its exchanges have been set out in, amongst others, a document titled “Capacity Management of Exchanges”.  The purpose of the document was to provide guidance and rules in relation to the creation of spare capacity on MDFs.

17. The document states that there are six planning options that can be adopted by Telstra to increase the capacity of its MDFs:

    (a)rationalisation – decommissioning and removing from the MDF any equipment or cable that is no longer required, including the movement of services from one piece of equipment to another lowly occupied piece of equipment to enable the decommissioning and subsequent removal of the first piece of equipment;

    (b)extension – adding verticals to an existing MDF within the existing available floor space;

    (c)extension with floor space recovery – creating additional floor space either through removal of redundant equipment or relocation of equipment in the exchange and extending the MDF onto the additional floor space;

    (d)extension with building alteration – creating additional floor space either through a building extension or change in internal walls to accommodate the extension of the MDF;

    (e)compression – replacing low density termination blocks with newer high density blocks (thereby decreasing the number of termination blocks on the MDF and creating vacant block positions);

    (f)use of the line side for equipment termination – using spare termination block positions on verticals on the line side of the MDF for equipment termination.

18. The policies adopted by Telstra to manage and increase the capacity of its MDFs in exchanges included:

    (a)a general planning principle that inadequate MDF capacity should not delay or prevent the installation of new equipment and that therefore, the planning decision on the appropriate MDF capacity management option should be made in sufficient time to allow for any potential solution to be implemented prior to running out of MDF capacity;

    (b)when additional MDF capacity is required for future growth within the next three years, Telstra’s capacity planners reserve the capacity within the Cadlink drawings;

    (c)the planning option to increase the capacity of an MDF must be chosen to provide the required capacity at the least cost;

    (d)a combination of planning options to increase the capacity of an MDF may be employed to deliver the optimum outcome;

    (e)typically, the following preferential order of the planning options applies:

    (i)rationalisation;

    (ii)extension;

    (iii)extension with floor space recovery;

    (iv)compression;

    (v)extension with building alteration; and

    (vi)use of line side block positions.

19. It would appear that in fact Telstra had adopted the same or similar practices and policies to those documented as described above from at least April 2006. 

20. These policies should be read as applicable subject to the requirements of the Telecommunications Act and the TPA, and the terms of the CRA’s and FAA’s.

    Exchange Capping

21. From July 2005, from time to time Telstra published on the Telstra Wholesale Website Capped Sites Notices. 

22. The notices took different forms over time.  The initial Capped Sites Notices between July 2005 and August 2007 represented that, in respect of certain of the exchanges identified in the notice, there was no longer any space available within the exchange for the installation of access seekers’ facilities (such as DSLAMs) although, subject to the availability of MDF space, access seekers might be able to locate their DSLAM external to the exchange and apply for an external interconnection cable to connect to the MDF.

23. In the period from on or about 1 September 2007 to the commencement of the proceeding, the Capped Sites Notices also represented that, in respect of certain of the exchanges identified in the notice, there was no longer any MDF space available for the installation of termination blocks by access seekers.  In these Notices, Telstra used the expressions:

    (a)“Racks Capped” to refer to exchanges that Telstra represented did not have any rack space or TEBA space available or that could be made available for use by service providers for the installation of their facilities; and

    (b) “MDF Capped” to refer to exchanges that Telstra represented did not have any MDF space available or that could be made available for use by service providers for the installation of termination blocks.

24. In the period from 11 April 2008 to the commencement of the proceeding, the Capped Sites Notices also represented that, in respect of certain of the exchanges identified in the notice, floor space or MDF space may be made available to access seekers subject to the performance of works to make that space available.  Telstra used the expression “Potential” to refer to exchanges falling into that category.

25. From time to time, and on various dates, in respect of each of the Seven Exchanges, Telstra:

    (a)decided to classify the exchange as MDF capped;

    (b)included the exchange in a Capped Sites Notice representing that there was no longer any MDF space available; or

    (c)decided to cease classifying the exchange as MDF capped and removed the exchange from the Capped Sites Notices.

26. The management of the TEBA access requests has been the responsibility of two divisions within Telstra.  The first division was the business unit called Telstra Wholesale, which was responsible for the supply of services by Telstra to its wholesale customers.  The second division was a business unit called Telstra Operations, which was responsible for the construction, maintenance and management of all of Telstra’s network facilities including local telephone exchanges.  There was an increase substantially during the period 2006 and 2008 with a number of TEBA requests; but there was no increase in the number of staff assigned by Telstra to the facilities access group.  I accept that if and to the extent there were resource constraints within Telstra in doing proper TEBA access requests those constraints were within the control of Telstra itself.

27. During 2006 and 2008 the facilities access group delegated the assessment of TEBA requests to TEBA access coordinators.  The role of the TACs was to liaise with others within Telstra and advise the facilities access group whether there was sufficient floor space and MDF capacity to satisfy each access request.  The Court heard evidence from some of the TACs who were responsible for the assessment of TEBA access requests (the subject of this proceeding), being:

    (a)       in respect of Queensland (Paddington), Ken Ansell;

    (b)       in respect of South Australia (St Peters), Greg Lines and Phil Bigg; and

    (c)       in respect of Western Australia (Bulwer and Sth Perth), Colin Eggleston.

28. The Court also heard evidence from Geoffrey Wicking who was an assistant to the Victorian TAC, Sharon Webster.  Evidence was not given by Ms Webster, nor by Graeme Wigg who was also a TAC for WA and involved in relevant decisions to refuse access.

29. The TACs were not employed within, and were not supervised by, the Facilities Access group (within Telstra Wholesale).  Each of the TACs who gave evidence worked either within the Fundamental Planning group or the Network Engineering or Network Design groups which were part of the Telstra Operations business unit.

30. The precise role of the TACs in respect of the allocation of MDF block positions in response to TEBA requests was not clear, but it appears that those decisions were further delegated by the TACs to persons who were appointed as ‘MDF Managers’ or ‘Area Planners’ or otherwise worked within the Fundamental Planning group.  In Queensland, Mr Ansell made recommendations to Mr Nightingale in the Fundamental Planning group of the MDF Management Team.  In Victoria, Mr Smith gave evidence that he was the MDF Manager for Melbourne metropolitan exchanges from April 2007 and was responsible for allocating space (although Mr Wicking gave evidence that he consulted Mr Halliday, who is described in Mr Wicking’s affidavit as a ‘planner’, in early 2006 in respect of the allocation of space on the MDF at the Port Melbourne exchange).  In respect of WA, Mr Eggleston said that the allocation of MDF space was the responsibility of the MDF Manager, being Mr Mawer (and in his absence Mr Shaw).  In respect of SA, Messrs Lines and Bigg gave evidence that the allocation of MDF block positions was the responsibility of the MDF manager, being Mr Pennington.

31. Within the Fundamental Planning division, Jon Lipton was the National Networks Manager – Towers and Facilities Planning from October 2005.  A number of Telstra employees who made decisions in respect of, or were involved in, access refusals in this proceeding reported directly or indirectly to Mr Lipton.  These included Messrs Ciaglia, Nightingale, Wicking, Glowik, Ansell and Halliday.  Nevertheless, Mr Lipton only became aware of Telstra’s policies concerning MDF management sometime in 2007.  He had not taken any responsibility to ensure that the planners that reported to him were complying with those policies, and he was not aware that Telstra had published a planning policy which stated that no project should be delayed because of insufficient MDF space.

32. There is no doubt that because of the physical constraints of the Telstra exchange’s management of the MDF capacity constraints was required.  Telstra was fully aware of these constraints and understood the need for management.

33. I should say something more about the Cadlink drawings.  The TACs and MDF Managers who had responsibility for TEBA access requests were aware of and used the Cadlink drawings.  In their affidavits, many of them said that the Cadlink drawings were not always completely accurate.  No adequate explanation was provided by any Telstra witness as to why measures were not taken to keep the Cadlink drawings up to date.  Regardless, no evidence was adduced by Telstra to demonstrate that the Cadlink drawings for the Seven Exchanges were materially inaccurate, as opposed to having minor inaccuracies.  A review of the Cadlink drawings for the Seven Exchanges in light of the events that occurred, including subsequent MDF audits and the uncapping of the exchanges, reveals that the Cadlink drawings were substantially accurate.  Most significantly, the Cadlink drawings for the Seven Exchanges identified vacant and unreserved block positions that were available for use by access seekers at the time of their requests. 

1. The Telstra’s policies and procedures concerning MDF capacity management were not communicated effectively or efficiently to TACs or to MDF Managers.  Therefore, despite the existence of written policies, the evidence uniformly revealed that the policies were not well known by employees responsible for TEBA access requests.

2. However, I do accept that the witnesses called by Telstra did appreciate generally the obligations upon Telstra to provide access.

3. I find that Telstra did not have any consistent policy, protocol or procedure for making decisions about capping exchanges.  Mr Semmen’s, the Manager, Facilities Access – Wholesale Deliveries and Operations for Telstra Wholesale, who in his affidavit set out what he described as a “process for capping and exchange” indicated that he did not know the criteria to be applied in connection with capping, nor was he informed of what process would be undertaken prior to capping.  He was unclear as to who had the authority within Telstra to cap an exchange.  There seemed to be also no process to reassess the capping of an exchange.  Telstra readily capped exchanges without any proper form of assessment.  However, Telstra was very slow to uncap exchanges after October 2007, where a process of verification and audit took up to six months.  I will return to this delay later in these reasons.

   CIRCUMSTANCES OF THE CONTRAVENING CONDUCT AT THE SEVEN EXCHANGES

4. There was a substantial amount of time spent at the hearing on evidence concerning the circumstances surrounding each contravention.  By the time final submissions were made, most of the primary facts did not seem to be in contention.  Significantly, the chronology of events which occurred at each exchange, and the actions of the relevant employees of Telstra did not seem to be greatly disputed.  The credit of the witnesses called by Telstra was not put in issue, although the ACCC did submit that all the evidence presented to the Court by Telstra should not necessarily be accepted.

5. The circumstances of the contravening conduct can be summarised as follows.

   Bulwer Exchange

6. In WA, the MDF Manager was responsible for MDF allocations.  This was Wayne Mawer and, in his absence, Greg Shaw.  Whilst Mr Mawer indicated that he did not have sufficient time to assess thoroughly MDF requests and that the workload was a bit overwhelming, I do not consider this was the reason for the refusals occurring in the manner in which they did.  Further, whilst Mr Mawer agreed that in August 2007 there was not much pressure on him from Telstra management to free up MDF space for access seekers, and that to his knowledge he had never refused an MDF allocation requested by Telstra because of a lack of MDF capacity, he was generally aware of the obligation to provide access where possible to access seekers.  The actions of Mr Mawer in checking the Cadlink drawings and discussing matters with others, as well as considering Telstra’s criteria for allocating MDF space, confirm that Mr Mawer took his responsibilities to allocate space seriously and conscientiously.

7. There was a queue for access at Bulwer after an Optus PSR was approved on 11 July 2006.  Between September 2006 and September 2007, the following access seekers submitted the PSRs:

Name of access seeker	PSR Reference No.	Date PSR submitted	No. of interconnect cables	No. of MDF block positions
Agile	9082F01	25 September 2006	9	9
Chime	9043F05 9043F05v2 9043F05v3	4 December 2006 17 January 2007 15 June 2007	18 36 72	5 10 20
Amcom	9016F03	2 March 2007	10	10
PowerTel	9033F02	4 June 2007	10	10

1. In response to each of the PSRs referred to in the above table, Telstra advised the access seeker that there was a queue for access to the Bulwer exchange and placed the PSRs on hold.  At first, the WA TAC, Mr Eggleston, placed the PSRs in a queue pending receipt of Optus’ DCP (which required an air conditioning audit).  Telstra approved the Optus DCP on 9 January 2007.  Despite that, the queue did not advance.  When Chime submitted version 2 of its PSR on 17 January 2007, it was told the PSR was queued pending completion of the Optus JCI.  Even when Telstra approved Optus’ JCI on 10 April 2007, the queue did not advance.  When PowerTel submitted its PSR on 4 June 2007, the queue remained in place. 

2. Although MDF requests by access seekers were queued by Telstra, its own MDF requests were dealt with immediately.  On 13 March 2007, Mr Mawer approved an MDF allocation to Telstra of 32 block positions.

3. Agile’s PSR was not finally assessed until 31 August 2007.  On 4 September 2007, Mr Mawer rejected the PSR.  Mr Mawer gave evidence that he did not recall the steps he took in dealing with the request.  He agreed, though, that at that time the line side of the Bulwer MDF had a lot of vacant block positions.  He also agreed that it was unlikely that he conducted a site visit to the exchange.  On 18 October 2007, he was asked by Mr Eggleston to specifically confirm that there was no space on the line side.  Mr Mawer believed that he was given directions by Fundamental Planning that line side blocks were not available.  I accept that evidence, although no one from Fundamental Planning gave evidence in relation to Bulwer. 

4. On 5 September 2007, Telstra decided to classify the Bulwer exchange as MDF capped.  All outstanding PSRs were then rejected.  A further PSR lodged by TPG on 5 November 2007 was also rejected.  From 1 September 2007, Telstra Wholesale included Bulwer in the Capped Sites Notices.

5. From on or about 1 September 2007 to about 11 September 2007, the Cadlink drawings showed that there were approximately 131 block positions on the MDF at the Bulwer exchange that were not in use by Telstra or service providers and approximately 39 further block positions on the MDF that had been reserved by Telstra for various future uses.  From on or about 11 September 2007 to late January 2008, the Cadlink drawings showed that there were approximately 99 block positions on the MDF at the Bulwer exchange that were not in use by Telstra or service providers, and approximately 74 further block positions on the MDF at the Bulwer exchange that had been reserved by Telstra for various future uses.  There is no evidence that suggests that these Cadlink drawings were inaccurate in a material way.

6. On 9 November 2007, Chime resubmitted its further revised PSR to Telstra for approval and attached photographs of line side block positions on the Bulwer MDF that were vacant and the line side blocks on which the “PIER BWER 02” junction cable terminated.  The “PIER BWER 02” junction cable was a cable that originally connected the MDFs in the Pier and Bulwer exchanges and occupied 4 verticals (48 block positions) on the MDFs at each of the Bulwer and Pier exchanges.  Telstra has adduced evidence that the “PIER BWER 02” junction cable was in use as a CAN cable at that time, but that was not known to Mr Shaw who dealt with Chime’s request.  Most junction cables were disused by mid 2007.  Mr Shaw said that he was unaware at that time of any plan or proposal to reuse the “PIER BWER 02” junction cable.  Mr Mawer gave evidence that if a junction cable was no longer in use, there was no reason why an access seeker should not be permitted to recover the termination blocks on which it terminated.

7. Mr Shaw and Mr Moiler decided that Chime should only be permitted to use 20 of the MDF block positions on which the “PIER BWER 02” junction cable terminated if Chime either paid for or undertook (at Chime’s expense) all of the work to remove the cable from the MDFs at both the Pier and Bulwer exchanges and also removed the cable between the two exchanges (having a length of approximately 2 kilometres).  Telstra and Chime reached an impasse on that requirement.  Mr Moiler did not give evidence.  Mr Mawer described the requirement as unreasonable.  Mr Shaw said that he did not consider any other option for satisfying Chime’s request and did not look to see if there were any other redundant blocks that could be used, even though that would have been a lower cost option for Chime.  He agreed that requiring Chime to remove the cable from both MDFs and the conduit had many valuable benefits for Telstra, freeing up substantial MDF space at both Bulwer and Pier and in the conduit, which Telstra would achieve for free at Chime’s expense.  Mr Shaw accepted that he had no incentive to look for less expensive options to satisfy Chime’s request.  Whilst Mr Shaw agreed to or accepted these various matters in Court, I do not consider that he consciously considered these matters at the time of considering access.

8. In or about late January 2008, Mr Mawer conducted an audit of the block space on the MDF at the Bulwer exchange.  The audit revealed that the MDF contained approximately 247 block positions that were available, or that could have been made available, for use by Telstra or access seekers. 

9. On 29 January 2008, Chime escalated its request to Luc Hermans, the General Manager of Wholesale Delivery & Operations.  This probably occurred at the request of Mr Semmens.  In any event, once this occurred, consideration of the request occurred at various levels within Telstra.  This demonstrated a willingness to duly consider the request, admittedly after Chime was putting pressure on Telstra.  However, as with the other exchanges, there is no evidence of a direction being given to refuse access, or even an attitude of making access difficult.  There was a lack of reliable information passing between relevant staff at Telstra, and failure of communication and decision-making at the appropriate level.  On 31 January 2008, Telstra advised Chime that there were now enough MDF block positions available at the Bulwer exchange to satisfy Chime’s request.  The approval required Chime to remove the junction cable “BWER MAYM 02” (being a junction cable between the Bulwer and Maylands exchanges) from the MDF but did not require Chime to remove the junction cable from the conduits between the Bulwer and Maylands exchanges.

10. At that time, Mr Eggleston became aware of the extent of the capacity available on the Bulwer exchange.  Despite that, he does not recall taking any step to uncap the exchange and there is no written record of him having done so.

11. Agile and TPG applied for access on 14 April 2008, three days after Telstra uncapped the exchange.  Chime applied on 26 March 2008 and was approved the next day.  Agile was approved 5 May 2008 and Telstra allocated space to TPG on 7 May 2008.  Subsequently, Amcom, Chime, Optus, PowerTel and TPG have all found space in the exchange to install equipment.  Amcom, PowerTel and TPG all had completed installing equipment within a few months of the uncapping, by September and October 2008.

    Carlton Exchange

12. Chime submitted a DSR to Telstra on 11 September 2007 requesting the installation of two external interconnect cables and 10 block positions on the MDF at the Carlton exchange.  Igor Chrystiuk was the relevant TAC for this request, but he did not give evidence.  Wayne Smith was the MDF Manager.  There was some delay in his response to the request, but on 4 October 2007 Mr Smith refused the request on the basis that there was no room on the MDF.  On 9 October 2007, Telstra advised Chime that its DSR was rejected because there was no MDF space available for use but that an audit would be carried out in the next month to see if any existing cables could be removed.

13. On 25 October 2007, Chime notified Telstra that it had recently been onsite and had identified a number of line side block positions on the MDF not currently in use, including at least 4 full verticals occupied by redundant cables, and sent supporting photographs to Telstra.

14. Mr Smith dealt with Chime’s renewed request.  In his affidavit, he said that he formed the view that not all of the verticals and blocks referred to by Chime were available and that there was insufficient space on the MDF to meet Chime’s request.  Mr Smith then considered whether other options were available, such as compression or rationalisation.  He discussed this with Victorian planner, Jeff Theobald.  Mr Theobald agreed that compression was the best option.  As a result of those discussions, on 12 November 2007, Telstra advised Chime that the only option to make capacity available was to compress cable 9 on verticals 6 and 7 onto vertical 38 so that Chime could use vertical 75 and that the cost to compress would have to be borne by Chime.  On 3 December 2007, Chime advised Telstra that it accepted that option and agreed to bear the costs associated with the compression of the cable.

15. Agile also submitted an EIC request on 28 November 2007 seeking the installation of 2 EICs and up to 18 block positions on the MDF at the Carlton exchange.  Telstra rejected that request on 12 December 2007 on the ground that there was no spare capacity on the MDF.  Wayne Halliday, a planner in the Fundamental Planning group, was involved in that rejection.  Mr Halliday did not give evidence.

16. On 17 December 2007, Mr Halliday sent an email to Mr Semmens stating that Chime’s request had been denied by the relevant area planner and asked Mr Semmens to advise Chime that the request was refused.  Mr Semmens replied to Mr Halliday stating that “Telstra should not be advising carriers to compress MDF frames”.  On 19 December 2007, Mr Semmens advised Chime that Telstra would not compress the MDF at the Carlton exchange or allow a carrier to do such a compression.

17. Mr Semmens agreed in cross-examination that Telstra had policies which made it practically impossible for access seekers to undertake compressions themselves and that in the real world the compression alternative was not available to access seekers at any time during the relevant period.  Access seekers were not allowed to engage Telstra to do compression work on their behalf and they were not allowed to do it themselves either.  He said that carriers might however be the beneficiaries of compressions that Telstra was undertaking for its own benefit (but only if they knew of them).  However, Mr Semmens was aware of risks in undertaking compressions, including mistakes by wholesale customer contractors. 

18. I do not consider that the evidence as to compressions shows a deliberate discriminatory approach to access seekers, although the views taken by Telstra personnel as to the risks, the expense and potential disruption did have a discriminatory effect.  Again, the Telstra personnel seemed to be undertaking the task of considering access, but unaware of their full obligations and were left with no direction or guidance.  In this respect, with regard to compression, the employees were not following Telstra’s written policies.

19. From about 2 January 2008, Telstra included the Carlton exchange in the Capped Sites Notices. 

20. On 24 January 2008, following the ACCC’s enquiries, Mr Halliday was asked to review the status of the Victorian sites on the Capped Sites Notices and he forwarded the request to various people including Jeff Theobald.  Mr Smith said that Mr Theobald asked him to investigate the options for making more space available on the Carlton MDF in about February 2008.  He visited Carlton and found approximately 2 line side verticals that held redundant junction cables (blocks on line side verticals 20, 21 and 22) and informed Mr Theobald.  Mr Theobald did not give evidence.

21. On 26 February 2008, Mr Theobald produced a Strategic Capacity Management Plan for the Carlton site and sent it to Mr Halliday.  The Plan did not mention the redundant junction cables identified by Mr Smith in his review.  The Plan noted that “since September 2007 trends in ADSL growth have steadily declined as competitors take away customers from ULL to their own equipment in our building”.  The Plan recommended that equipment side vertical 59 be reserved for additional TEBA requests and that once that vertical was filled, verticals 74 and 75 be made available for TEBA.

22. Telstra did not decide to cease classifying the Carlton exchange as MDF capped until on or about 9 April 2008.

23. Chime and Agile applied for access to the exchange the same day that Telstra removed the exchange from its list of capped sites.  TPG applied three days later.  Chime’s PSR was approved on 22 April 2008 and it completed installing its equipment by November 2008.  Agile and TPG completed their installation in 2009.

    Northcote Exchange

24. As far as this exchange was concerned, the decision to cap the MDF at Northcote and the failure to uncap it when an audit showed a large amount of spare capacity reveal Telstra’s failure to implement processes to ensure it complied with its access obligations and that relevant employees understood those obligations.

25. Between May 2007 and September 2007, the following access seekers submitted PSRs to Telstra seeking TEBA access:

Name of access seeker	PSR Reference No.	Date PSR submitted	No. of interconnect cables	No. of MDF block positions
Chime	9138F05	23 May 2007	18	5
TPG	9049F03	1 August 2007	16	16
PowerTel	9226F01	10 August 2007	10	10
Agile	9093F01	6 September 2007	14	14

1. On 5 June 2007, Chime was told by Telstra Wholesale that its PSR was on hold because the TAC was unable to get an MDF allocation.

2. Mr Smith assessed Chime’s PSR.  He had been in the role for about two months.  Although the Cadlink drawings at the time revealed a large amount of vacant block positions particularly on the line side, Mr Smith said that he did not consider using scattered equipment side blocks or line side blocks for Chime’s request.  Although Mr Smith exhibited to his affidavit Telstra’s MDF capacity management documents, in cross examination he said that he was unaware of their existence during the time when he was an MDF manager between April 07 and April 08.  The documents were only brought to his attention when he was preparing to give his evidence.

3. At 2.07pm on 12 June 2007, Igor Chystiuk sent Mr Smith an email attaching a marked up Cadlink drawing of the Northcote exchange showing blocks that were vacant and blocks that were redundant and could be removed.  Mr Smith said in cross examination that he did not recall that email.  Despite that email, at 4.06pm that day Mr Smith sent an email to Wayne Halliday requesting that the Northcote site be capped to TEBA requests and stating that the MDF required an audit.  Within 12 minutes, Mr Halliday had sent an email to Mr Semmens capping the exchange.  In his affidavit, Mr Smith said that he understood that capping was a temporary measure to be used in cases of very congested MDFs while a solution for creating space was found.  In cross-examination, Mr Smith accepted that he had no idea how long the audit would take (although he thought that it would only take a couple of weeks) and nor did he know what effect the capping would have on access seekers.  He had no doubt, though, that there would be some space made available at the Northcote exchange after the audit. 

4. On the same day, Telstra advised Chime that its PSR was rejected as the exchange was MDF capped.  The other PSRs from TPG, PowerTel and Agile were rejected as soon as they were submitted.  From about 1 September 2007, Telstra included Northcote in the Capped Site Notices.

5. Despite having been requested in June 2007, the audit of the MDF at Northcote was not completed until 19 October 2007, for reasons that have not been explained by any Telstra witness.  The audit revealed that a very large number of block positions on the MDF were available, or could have been made available, for use:

   (a)on the equipment side, up to 7 full verticals could have been recovered with rationalisation, compression and relocation work;

   (b)on the line side, there were 14 fully vacant verticals, 8 others with some vacant block positions and 15 verticals containing decommissioned trunk cables.

6. In cross-examination, Mr Smith agreed that the audit showed there was a great deal of spare capacity at Northcote but he did nothing further about uncapping Northcote at that stage because he considered that he was no longer the person responsible to make that decision.

1. Despite the conclusions expressed in the October 2007 audit of the Northcote exchange, Telstra did not cease classifying the Northcote exchange as MDF capped until 9 April 2008.

2. On 11 December 2007, Charlie Ball, an area planner, forwarded the audit to various people including Jeff Theobald, Wayne Halliday and Bogdan Folcik.  Mr Folcik replied on 16 January 2008 stating that “Given the availability of verticals, albeit on the line side, I would suggest we do nothing – especially since house-keeping money is so hard to come by”.  No-one gave evidence to explain why the audit did not lead to Northcote being uncapped.  Mr Semmens gave evidence that he was not even aware of the fact that an audit of Northcote had been undertaken in 2007.

3. Chime applied for access on the same day the exchange was uncapped.  It was approved 12 days later, on 23 April 2008.  TPG applied on 14 April 2008 and Agile applied the next day.  Chime completed installing its equipment by 10 November 2008 and Agile completed installing its equipment by 16 July 2009.

   Paddington (Qld) Exchange

4. I say at the outset in respect of the Paddington (Qld) exchange that there is no evidence of any deliberate anti-competitive conduct.  In respect of the rejection of the Optus request, there was in my view a conscientious consideration of the PSR, although limited to Mr Ansell’s understanding of the practices at the time.

5. All the evidence, including evidence of a site visit prior to rejection of the request to confirm the lack of space on the equipment side, and the liaison between Mr Ansell and another TAC, Mr Johnson, upon who Mr Ansell relied, leads to the conclusion that the rejection of Optus was because of process failure.  There is no suggestion of rejecting a request for an improper purpose.

6. Optus submitted a PSR to Telstra for access at the Paddington exchange at the end of June 2006.  On 12 July 2006, Telstra decided to classify the Paddington exchange as MDF capped and, on the same day, Telstra advised Optus that its PSR was rejected because there was no MDF space available.

7. Mr Ansell was the TAC for Queensland and took the lead role in making this decision that the Optus PSR be rejected.  He consulted with others such as David Nightingale, a Facilities Access Planner for Queensland, but it appears Mr Nightingale acted on Mr Ansell’s recommendations.  Mr Nightingale did not give evidence.

8. At the time the Optus PSR was rejected, there was substantial spare capacity on the MDF, particularly on the line side.  The Cadlink drawings showed 218 vacant block positions – 43 on the equipment side and 175 on the line side.

9. Mr Ansell’s explanation of his rejection of Optus request was objectively unsatisfactory, but I consider his evidence to be truthful.  It shows, as with the other exchanges a lack of co-ordination, proper direction and sufficient knowledge of access obligations.  It does not show a deliberate attempt to prevent access to Optus, nor does it show Optus was discriminated against. 

10. Mr Ansell received no training when he was appointed as a TAC, although he was aware generally of the obligation to provide access and option for creating space on the MDF.  Although he said in his affidavit that space on the MDF was “fairly tight”, Mr Ansell agreed in cross examination that it was wrong to describe the line side as fairly tight.  He said in his affidavit that he had a practice of not allocating line side space to access seekers.  This was consistent with his role, although he said that he had heard that facilities access planners could allow the line side to be used if there was insufficient space on the equipment side.  Mr Ansell also said in his affidavit that he considered that TACs had no role in, or authority to implement any of the options to create additional MDF space in accordance with Telstra’s written policies on MDF capacity management and that that was the role of Telstra’s planners.  No evidence was given by Mr Nightingale to explain why he did not allocate line side space to Optus.

11. TPG submitted a PSR seeking 10 block positions on 27 July 2006.  Mr Ansell suggested to Nightingale that Telstra could offer TPG a line side allocation on the MDF.  Nightingale agreed to that suggestion.  Whilst this was in contrast to the treatment of Optus, as I have said, I do not conclude that there was any positive discrimination shown against Optus.

12. In his affidavit, Mr Ansell said “there was no Telstra process for revisiting PSRs that had been rejected, and so the approval of TPG’s 9007F02 PSR did not cause me to revisit Optus’ 9029F05 PSR that had been rejected on 12 July” (ie two weeks earlier).  In cross-examination, Mr Ansell said that he positively adverted to the possibility of offering Optus the same opportunity that he had offered TPG, but because there was no Telstra process which would permit him to do so, he did not.  Again, this demonstrates a lack of instruction to employees, and lack of proper process, rather than the implementation of a deliberate policy to make access difficult. 

13. PowerTel submitted a PSR on 29 September 2006 seeking 10 block positions.  Mr Ansell did not remember assessing the PSR but believes he formed a view that it could be accommodated on the line side.  Telstra decided to approve PowerTel’s PSR on or about 9 October 2006 and allocated 10 line side block positions.

14. On 15 February 2007, Optus submitted a further PSR seeking 13 block positions.  Mr Ansell was involved again in the assessment.  He recommended the rejection of this PSR on 21 February 2007 because there was “insufficient MDF space” and he recommended that Paddington should be capped because it had “extremely little MDF space”.  This is what occurred.

15. At that time, the Cadlink drawings at Paddington showed that there were 177 vacant block positions – 44 on the equipment side and 133 on the line side.  Mr Ansell said in his affidavit that he did not consider that the equipment side had sufficient space to accommodate Optus’ PSR but he gave no reason why the line side could not have been used.  In cross-examination, Mr Ansell said that he believed that consideration was given to allowing Optus to use block positions on the line side, but he could give no explanation to why it was not done in circumstances in which there were many block positions vacant and available for use.

16. Telstra included Paddington in the Capped Sites Notice from about 1 September 2007.  However, the Capped Sites Notice dated 1 November did not include the exchange.  It was reinserted into the Capped Sites Notice from about 4 December 2007.

17. Mr Ansell received a request from Telstra Wholesale on 16 October 2007 asking him to confirm whether Paddington was capped.  He responded by email on the same day stating that Paddington was capped due to “very, very, few MDF block spaces remaining, therefore they are reserved for Telstra”.  When asked about the accuracy of his response in that email in cross-examination, he said it was “myself and maybe the other TACs taking a liberty”.

18. I accept Mr Ansell’s evidence.  Again, the evidence demonstrates that Telstra failed to implement proper instructions or policies to its employees. 

19. Agile and Chime applied for access the day the exchange was uncapped.  Optus applied on 23 April 2008.  All three carriers had their PSRs approved on 8 May 2008.  Chime completed installation of its equipment in November 2008.  Optus have subsequently completed three installations in the exchange.

    Port Melbourne Exchange

20. TPG submitted a PSR on 23 December 2005 seeking the installation of 6 interconnect cables and 6 block positions on the MDF.  Geoffrey Wicking assessed that PSR.  He assisted Sharon Webster, a Victorian TAC (who did not give evidence).  In his affidavit, Mr Wicking said he conducted a site visit but could not identify suitable blocks on the equipment side of the MDF.  He did not consider the line side.  On 10 January 2006 he sent an email to Wayne Halliday, an area planner, stating that the MDF was full and that he did not know if an extension was possible.  On 20 January 2006, Mr Halliday responded stating the MDF was at capacity and rejecting TPG’s PSR.  Mr Wicking sent an email to Telstra Wholesale saying that the MDF was at capacity.

21. In about July 2006, Port Melbourne was listed on the Capped Sites Notices.

22. On 31 August 2006, Telstra rejected a PSR from Agile on the basis that there was no MDF space available for use and the MDF could not be extended.  In September 2006, Agile investigated the availability of space on the MDF at the Port Melbourne exchange through its contractor Visionstream.  As a result of that investigation, on 25 September 2006, Agile requested Telstra to re-assess its PSR in respect of the Port Melbourne exchange.  On 19 October 2006, Telstra advised Agile that its PSR in respect of the Port Melbourne exchange had been re-assessed and approved.  On the same day, Agile asked whether it was possible to increase the allocation of block positions to 9, and Telstra approved that increase.

23. No explanation was provided by Telstra witnesses as to why TPG’s PSR was rejected while Agile’s was accepted.  Port Melbourne remained on the Capped Sites Notice even after Agile’s PSR was approved.

24. In or around November 2006, George Avramopoulos conducted a review of the capacity of the MDF at the Port Melbourne exchange, the results of which are contained in a document titled “MDF Capacity Plan” dated 20 November 2006.  Mr Avramopoulos understood that the review was to ensure that Telstra’s broadband requirements could be met.  He was not aware that Port Melbourne was capped.  Although the Plan stated that there were no spare equipment side verticals, Mr Avramopoulos agreed that there would have been scattered blocks that were spare.  Mr Avramopoulos did not check to see if there were redundant blocks.

25. Following preparation of the MDF Capacity Plan, in December 2006, Mr Avramopoulos prepared a project brief for Advanced Services to rationalise the equipment side of the Port Melbourne MDF in order to create additional MDF space for Telstra’s future broadband needs.  The rationalisation was performed in the first half of 2007.  Following the rationalisation, at least 104 block positions on the equipment side of the MDF were freed up.  The Cadlink drawings were updated on 21 June and 20 July 2007 to show this.

26. On 5 February 2007, Telstra rejected a PSR from Chime.

27. On 26 July 2007, PowerTel submitted a PSR seeking the installation of 10 interconnect cables to be installed and 10 block positions on the MDF.  On 26 July 2007, Telstra advised PowerTel that its PSR had been rejected on the basis that there was no space available on the MDF.  No explanation was provided by Telstra witnesses as to why PowerTel’s PSR was rejected even though a large number of block positions on the MDF had at that time been freed up.

28. On 21 January 2008, TPG submitted a PSR seeking the installation of 10 interconnect cables and 10 block positions on the MDF.  Mr Wicking sent an email to Telstra Wholesale asking whether Port Melbourne was capped.  Mr Deguara told him that it was.  Mr Wicking then rejected the PSR.

29. Chime and TPG applied for access on the same day the exchange was uncapped; Optus applied three days later.  Telstra approved the Chime and TPG PSRs just 11 days after the uncapping.  All three carriers completed their installations by late August 2008.

    South Perth Exchange

30. As was noted above, in WA Mr Mawer, the MDF Manager, was responsible for MDF allocations.

31. The events at South Perth illustrate Telstra’s failure to implement consistent policies with regard to MDF capacity management or to train or supervise its staff in respect of those policies.  The events also indicate that Telstra staff did not properly consider information provided by Chime, nor properly respond to such information.

32. In late October 2005, a PSR submitted by Amcom was queued, and Amcom was advised that it would need to perform an MDF compression to obtain space.  In March 2006, Amcom sought permission from Mr Eggleston to extend the MDF by 3 verticals instead of performing a compression.  Mr Eggleston confirmed that an MDF extension would be a less costly option than a compression.  Over the ensuing few months, Amcom was informed that it was not permitted to perform an expansion and, while it was theoretically permitted to perform a compression, no contractors had been authorised by Telstra to perform a compression for access seekers (they were only authorised to perform compressions for Telstra).  Ultimately, on 3 July 2006, Telstra informed Amcom that it would allocate it 2 block positions on the line side of the MDF (and not the 6 block positions Amcom had been seeking).

33. Unknown to Amcom, Telstra had been performing its own compression of the MDF during 2006 while refusing to allow Amcom to perform a compression.  Amcom only became aware of this through a site visit.  Telstra’s compression freed up 12 verticals on the line side.  On 7 July 2006, Amcom asked if it could use 10 block positions and Telstra approved the request.  Mr Eggleston said that he could not recall anyone telling him (in that period) that Telstra was performing the compression.

34. Like Bulwer, there was a lengthy queue for access at South Perth after an Optus PSR had been approved.  Between July 2006 and July 2007, the following access seekers submitted the following PSRs to Telstra:

Name of access seeker	PSR Reference No.	Date PSR submitted	No. of interconnect cables	No. of MDF block positions
Chime	9054F03 9054F03v2	31 July 2006 27 April 2007	18 54	5 15
PowerTel	9194F01	4 June 2007	10	10
Primus	9333F01	30 July 2007	32	8

1. In response to each of the PSRs referred to in the table, Telstra placed the PSRs in the TEBA queue for access.  Like Bulwer, Telstra initially told Chime that the queue would progress after Optus had completed its D&CP because a power and air-conditioning audit was required.  However, this did not occur.  The Optus D&CP was approved by Telstra on 20 December 2007 and its JCI was completed on 18 April 2007.  Even after JCI completion, Telstra maintained the TEBA queue.  Mr Eggleston could not provide an explanation why that occurred, although he thought that Telstra needed to wait until Optus had completed its DSLAM build.

2. The queue did not progress until 22 August 2007, when Telstra Wholesale resubmitted Chime’s PSR to Mr Eggleston.  Mr Mawer rejected the PSR.  He gave evidence that he could not recall the steps he took, although he believed that someone from Fundamental Planning may have given him directions about MDF allocations.  The Court did not hear evidence from any Fundamental Planner regarding South Perth.

3. Mr Eggleston gave evidence that it was his responsibility to update the Cadlink drawings for TEBA allocations and he performed that task diligently.  There is no reason to believe that the Cadlink drawings for South Perth were other than materially accurate (save for an error regarding equipment side verticals 21, 22 and 25).  Between about 28 August 2007 and 10 October 2007, the Cadlink drawings showed that there were approximately 185 block positions that were not in use by Telstra or service providers and  approximately 86 further block positions that had been reserved by Telstra for various future uses.  From on or about 10 October 2007 to 11 April 2008, Telstra’s Cadlink drawings showed that there were approximately 241 block positions on the MDF at the South Perth exchange that were not in use by Telstra or service providers and  approximately 14 further block positions that had been reserved by Telstra for various future uses.  In February 2008, Mr Mawer conducted an audit of the MDF at the South Perth exchange.  The audit confirmed that the Cadlink drawing was materially accurate, although it corrected the error concerning equipment side verticals 21 and 22 (they were vacant), highlighted a number of redundant junction cables and removed various line side reservations that had been made by Telstra.

4. On or about 28 August 2007, Telstra decided to classify the South Perth exchange as MDF capped.  It then rejected all outstanding PSRs.  From about 1 September 2007 it placed Sth Perth on the Capped Sites Notices. 

5. On or about 31 August 2007, Gary Chappell of Chime visited the South Perth exchange and observed that there were vacant block positions on both the equipment and line sides of the MDF and took photographs of some of the vacant block positions on the equipment side.  The photographs identified two of the vacant verticals as numbers 21 and 22.  As noted above, the Cadlink drawing as at that date erroneously showed that verticals 21 and 22 were in use.  The error was corrected in the Cadlink drawing dated February 2008.  In respect of the other verticals that were photographed by Mr Chappell, the Cadlink drawing as at August 2007 indicated that verticals 30 to 33 were vacant but reserved.  It seems likely that they were the other verticals photographed by Mr Chappell.  On 5 September 2007, Gary Chappell of Chime sent an email to Mr Semmens at Telstra attaching the photographs.  Mr Semmens sent the photos to Mr Eggleston.  Mr Eggleston could not recall whether he sent the photos to Mr Mawer, and there is no email that indicates that he did.  Mr Eggleston told Mr Semmens that there was no space, without making any other enquiries.

6. On 27 September 2007, Mr Chappell sent an email to Mr Semmens advising that he had visited the South Perth exchange and attached the photographs taken during his visit.  The photographs were of verticals 2 to 4 (on which were terminated unused Junction Cables 31, 34 and 131) and vertical 31 and surrounding verticals.  On 10 October 2007, Telstra advised Chime that its PSR in respect of the South Perth exchange was ‘conditionally approved’ and allocated 15 MDF block positions to Chime (being line side vertical 2 blocks 1 to 12 and vertical 3 blocks 1 to 3). 

7. Despite approving Chime’s PSR, there is no evidence that Mr Eggleston, or anyone else, took any steps to review the capping of the exchange.

8. Following the MDF audit conducted by Mr Mawer in February 2008, Mr Eggleston sent an email to Mr Semmens’ group advising that the South Perth exchange was uncapped.  Within 20 minutes, Mr Ciaglia responded stating that the only person who could uncap an exchange was the team leader of the area planner for the site and that Mr Eggleston should “park” the South Perth exchange.  Accordingly the South Perth exchange remained capped until April 2008.

9. Both Chime and Primus submitted PSRs on the same day that Telstra uncapped the exchange.  Primus was approved on 22 April 2008 and finished installing equipment within 45 days of the uncapping.  Chime was approved 23 April 2008 and completed its installation in August 2008.

   St Peters Exchange

10. Throughout the period 2006-2008, the St Peters exchange had substantial vacant block positions on the MDF.  In early 2006 there were almost 12 unused verticals on the equipment side.  By January 2007, the position had not changed much, with about 9 vacant verticals.  (These can be seen from the Cadlink drawings which the SA TAC, Mr Lines, described as very accurate).

11. Adam Internet submitted a PSR on 19 January 2007 requesting 18 block positions on the MDF.  Mr Lines forwarded the request to the MDF Manager, Mr Pennington, who rejected the request on the basis that Telstra had reserved 9 vacant equipment side verticals for ISAM growth.

12. Whether or not the reservation of 9 verticals for ISAM growth was reasonable or not, does not matter.  I accept that that was the basis of the view Mr Pennington actually held, namely that 9 verticals were needed for ISAM grouth.

13. Mr Pennington gave evidence that he had no role in capacity planning and no role in capacity management of MDFs.

14. On 5 February 2007, Sam Silvester of Adam Internet sent an email to Telstra stating his belief that there was sufficient space on the MDF at the St Peters exchange for 12 blocks positions to be allocated to Adam Internet (Adam Internet had originally requested 18 block positions).  Mr Pennington approved that request.

1. The seriousness that the contravening conduct must be considered in the context of the fact that the provision of access to bottleneck infrastructure like Telstra’s PSTN has been an integral feature of competition policy in Australia for nearly a decade.  It was clearly intended to provide considerable consumer benefits in relation to price and performance in the telecommunications sector.  The introduction of the standard access obligations, which apply only in respect of the telecommunications regime, was a response to a highly uncompetitive structure of the Australian telecommunication sector.  This sector is characterised by a high level of vertical integration and associated market power on the part of Telstra, giving it both the ability and the incentive to favour its downstream retail businesses over its wholesale customers. 

2. As the evidence indicated, once Telstra uncapped an exchange on the 11 April 2008, there were a number of applications for access which could have been accepted.  This is not to say that the access numbers increased; just that there was the ability of Telstra to accommodate these requests.  This demonstrates that significant capacity was available at the exchanges before the uncapping and that Telstra’s approval processes for PSR’s before uncapping unnecessarily kept access seekers out of exchanges for lengthy periods.

3. The statutory obligations that Telstra contravened were first imposed on Telstra in 2001.  Telstra is a very well resourced company.  Telstra had more than five years to organise its affairs so as to satisfy the obligations.  Whilst I have accepted the conduct did not occur with deliberate anti-competitiveness in mind, the conduct did not occur by accident or by inadvertence.  Telstra’s managers and employees were given the authority on behalf of the Telstra to make decisions to refuse competitors access to its facilities and to impose conditions on any offer of access.  The relevant managers and employees were not properly trained in relation to Telstra’s access obligations, or otherwise failed to comply with any training that was given to them, and Telstra had no adequate system for checking on compliance. 

4. In this regard, Telstra failed to put in place exchange access processes and procedures which would ensure that Telstra meet the required regulatory and legal obligations. Telstra also failed to provide the necessary oversight to ensure that Telstra was fulfilling its access obligations. This is not a case in which junior employees ignored directions from senior management. The staff involved were not low level staff but experienced staff. In the period from 2006 to 2008, I find that Telstra took no steps to develop a culture of compliance with its access obligations under the TPA and the Telecommunications Act.

5. The obligations imposed by the TPA and the Telecommunications Act are strict or absolute in the sense they do not require proof of an anti-competitive purpose or effect or of any intention. The strict nature of the obligations recognises that Telstra has very substantial market power in respect of fixed line telecommunications services (especially to residential consumers) and any refusal by Telstra to provide access to exchange facilities in a timely manner will harm competition. The importance of these obligations is also reflected in the size of the maximum penalty for each contravention, namely $10 million. I accept that this maximum penalty is not only directed to particular contraventions of the access obligations, and covers many possible contraventions. However, this does not detract from the importance of the access obligations cast upon Telstra, and the significant consequences that could flow from failing to comply with the requirements of the Telecommunications Act.

6. The admitted contraventions demonstrate substantial non-compliance by Telstra with its legal obligations.  The non-compliance was within seven exchanges located in four States, although only seven out of the five hundred exchanges nationwide.  The contraventions were repeated on numerous occasions over a period of nearly two years, although this was only a very small percentage of the total activity. 

7. As the evidence indicates, the circumstances relating to each contravention involved various combinations of the following salient features:

   ·there were rejections notwithstanding large numbers of vacant line side blocks available;

   ·decisions were made to cap with little or no checking;

   ·there were failures to give access over lengthy periods;

   ·there were failures to uncap or provide access when an audit identified space available;

   ·there were failures to provide access notwithstanding photographic evidence available that space was available; and

   ·there were instances where Telstra was aware of significant available space but continued to cap for a lengthy period of time. 

8. The ACCC in proposing penalties for each individual offence allocated different proposed penalties depending upon the gravity of the contravening conduct which related to the continuation of the failure to provide access, and specific matters that were said to aggravate the contravening conduct.  These included placing unreasonable conditions on access that was sought, continuing to refuse access after a audits identified space available and inconsistent conduct between access users.

9. In considering the evidence of the circumstances of the contraventions, there were a number of decisions made by Telstra staff that did not seem at all explicable and that objectively seemed unreasonable.  However, looking at the evidence as to how these decisions were made, I do not detect any deliberateness to act in anti-competitive conduct on the part of any of the members of the Telstra staff.  Therefore, whilst difficult to explain, decisions were taken and demands were made on access seekers on occasions by Telstra which were unreasonable, but which were explicable by reference to various failures of process in each individual case. 

10. This is not to say there was one cause, or one episode or one contravention.  Even the ‘process failure’ relied upon Telstra as the common cause involved many aspects.  Each process failure had a different impact as can be seen from the circumstances of each contravention.  In most cases Telstra staff did not understand their responsibilities or role within Telstra.  In some cases, there was a lack of communication between Telstra staff, or a communication of misinformation.  In other cases, there was a failure to provide access (such as to uncap a site after an audit) when information clearly indicated that space was available.  There was a general lack of training and co-ordination, and knowledge of the importance and significance of access obligations.  There was also a failure to respond to changed circumstances, so that when access was available it could be provided.  There were other failures which Telstra now accepts need to be addressed, and which Telstra has sought to address in its new procedures. 

11. As I have already indicated, I do not accept the submission of Telstra that the conduct the subject of the contraventions should be viewed as effectively one contravention, with a maximum penalty to be $10,000,000. I have already considered s 570(5) of the Telecommunications Act, and concluded that the provision has no application to this proceeding.

12. The Telecommunications Act directs attention to the conduct or act of not providing access, not the underlying reason for refusing access. In other words, the Telecommunications Act does not penalise for a failure to have a system in place to provide access; the obligation is to provide access in accordance with the legislative requirements. For the reasons I have already given, failing to provide access is a significant failure in competition terms. The failure to implement policies which could have provided access if implemented is not an excuse or mitigating factor that has significant weight. As I have said, I do accept that the conduct of Telstra was not deliberately anti-competitive.

13. These considerations would indicate that the penalty for each contravention should be at the lower end of the scale, which I would take to be in the range of $750,000 to $1.5 million.  I come to this range keeping in mind various facts or salient features common to each contravention.  If any one or more contravention involved deliberate anti-competitive behaviour, then depending on the circumstances, the higher range of penalty may have been appropriate.

14. In my view, the significant factor in considering and distinguishing each contravention (keeping in mind my earlier comments) is the period of time in which there has been a failure to provide access.  The other factors relied upon by Telstra in Schedule A are relevant to the overall circumstances of each contravention, but I do not consider they warrant any ‘additional’ penalty.  I say this because of the findings I have made in relation to the circumstances of each contravention, and my acceptance of the evidence of those employees called by Telstra. 

15. In considering the range I have adopted, taking into account the period in which access was not provided, I assign the following amounts:

    1.$750,000 for where access was not provided for 3 months or less;

    2. $1,000,000.00 for where access was not provided for 3 months to 1 year; and

    3.$1,500,000.00 for where access was not provided for more than 1 year.

16. On this basis, the starting penalty before considering any discount by reference to each of the Seven Exchanges is as follows:

Site	Contravention	Time period	Penalty
BULWER
Agile 9082F01 PSR	5/09/2007 – 11/04/2008	1,000,000.00
Chime 9043F05 PSR	12/09/2007- 5/02/2008	1,000,000.00
Amcom 9016F03 PSR	12/09/2007 – 11/04/2008	1,000,000.00
PowerTel 9033F02 PSR	12/09/2007 – 11/04/2008	1,000,000.00
TPG 9117F02 PSR	5/11/2007 – 11/04/2008	1,000,000.00
Chime 9043F06 PSR	18/12/2007 – 5/02/2008	750,000.00
TOTAL:			5,750,000.00
CARLTON
Chime 06C01 EIC DSR	9/10/2007 – 11/04/2008	1,000,000.00
Agile 59C01 EIC DSR	12/12/2007 - 11/04/2008	1,000,000.00
TOTAL:			2,000,000.00
NORTHCOTE
Chime 9138F05 PSR	12/06/2007 – 11/04/2008	1,000,000.00
TPG 9049F03 PSR	2/08/2007 – 11/04/2008	1,000,000.00
PowerTel 9226F01 PSR	13/08/2007 – 11/04/2008	1,000,000.00
Agile 9093F01 PSR	7/09/2007 – 11/04/2008	1,000,000.00
TOTAL:			4,000,000.00
PADDINGTON
Optus 9209F05 PSR	12/07/2006 – 14/04/2008	1,500,000.00
Optus 9209F06 PSR	23/02/2007- 11/04/2008	1,500,000.00
EFTel 9066F01 PSR	5/02/2008 – 11/04/2008	750,000.00
TOTAL:			3,750,000.00
PORT  MELBOURNE
TPG 9145F01 PSR	23/01/2006 – December 2006	1,000,000.00
Agile 9075F01 PSR	31/08/2006 – 19/10/2006	750,000.00
Chime 9255F02 PSR	5/02/2007 – 11/04/2008	1,500,000.00
PowerTel 9216F01 PSR	26/07/2007 – 11/04/2008	1,000,000.00
TPG 9145F02 PSR	30/01/2008 – 11/04/2008	750,000.00
TOTAL:			5,000,000.00
SOUTH PERTH
Chime 9054F04	29/08/2007 -10/10/2007	750,000.00
PowerTel 9194F01 PSR	30/08/2007 – 11/04/2008	1,000,000.00
Primus 9333F01 PSR	30/08/2007 – 11/04/2008	1,000,000.00
TOTAL:			2,750,000.00

ST PETERS
Adam Internet 9010F02 PSR	25/01/2007 – 8/02/2007	750,000.00
Primus 9299F01 PSR	31/05/2007 – 11/04/2008	1,000,000.00
Agile 9040F02 PSR	18/09/2007 – 5/10/2007	750,000.00
TPG 9349F01 PSR	7/02/2008 – 11/04/2008	750,000.00
TOTAL:			3,250,000.00

This would make a total penalty of $26,500,000 before considering any discount.

1. In considering the overall conduct, the number of refusals and the duration of failure to provide access over a period of time, this seems to me a proper penalty for the contraventions taking into account the ‘totality principle’. 

2. It is then necessary to consider the extent of any discount for co-operation, remorse, acceptance of responsibility, admission of liability, and the implementation of a compliance program.

3. I accept that Telstra should receive a discount for a large amount of co-operation, acceptance of responsibility, admission of liability and implementation of a compliance program.

4. I am not satisfied, however, that Telstra has demonstrated any remorse, nor that it appreciates the seriousness of its conduct.  Undoubtedly, Telstra does not want to contravene again, and has procedures in place to seek to avoid that occurring.  Telstra has co-operated with the ACCC and at trial.  However, Telstra’s submissions in support of penalty (treating the wrongful conduct as just a single failure of process), and Telstra’s failure to specifically express remorse through its Counsel, lead me to conclude that Telstra has no remorse further than accepting responsibility and taking corrective steps.

5. The ‘antagonism’ referred to by the ACCC, whilst I do not regard as leading to a conclusion of deliberate anti-competitive behaviour, may explain the lack of remorse and an appreciation of the seriousness of the admitted contraventions. 

6. Nevertheless, there has been a large degree of co-operation putting aside the period of delay referred to previously, and there has been an acceptance of responsibility and the implementation of a compliance program.

7. I have come to the view that a 30% discount is an appropriate discount to give to Telstra.  This would make the total penalty $18,550,000.

8. Again, it is appropriate to consider whether this penalty is the appropriate penalty to impose taking into account the ‘totality principle’.  In my view, no other factors require that penalty to be further adjusted.  I have kept in mind the submissions of Telstra as to parity.  Each case must be looked at in its own specific circumstances.  The circumstances of the cases relied upon by Telstra do not lend themselves to any easy or ready comparison.  

9. I observe that even if I approached the task by looking at each exchange, which is a possible way to group the contraventions, taking into account the number of refusals and period of access being refused, I would have reached a similar result as to penalty. 

10. The issue of costs of the proceeding has been deferred by the agreement of the parties.  The ACCC has indicated that it will seek costs of the proceeding.  Costs are a relevant matter to take into account in considering the final penalty.  Of course, the Court does not know the exact amount of costs involved, nor upon which party a costs order may fall.  I have assumed that there will be a substantial costs order in favour of ACCC, although I anticipate that Telstra will submit for a discount in view of the conduct of the trial, particularly in relation to the issue of the loss and damage sustained by the access seekers.  Apart from making the above assumption, I do not consider the final outcome as to costs will otherwise impact upon the considerations that have led me to impose the penalties I have upon Telstra.

11. I make one final observation as to penalty.  It will be apparent that I have rejected in many respects the submissions of the ACCC as to the circumstances of the contraventions.  In part this explains the reason for the overall penalty not being in the range submitted by the ACCC.  In addition, the ACCC has failed to prove any actual loss being sustained by the access seekers.  I have also given a greater discount for co-operation, acceptance of responsibility, and for voluntarily implementing a compliance program.  This arises because, whilst I accept the ACCC’s submission that the response was not timely in some respect, in many other respects Telstra acted appropriately and deserves to be rewarded.  There was, however, no true remorse shown for Telstra’s conduct, nor an appreciation of the seriousness of the admitted contraventions.

    OTHER RELIEF

12. I now turn to the other relief sought by ACCC.

13. I propose to make declarations in the form sought by the ACCC.  Declaratory relief will serve the public interest in a number of ways:

    (a)to define and publicise the type of conduct that constitutes a contravention of the relevant provisions of the Telecommunications Act and the TPA, serving the purpose of deterrence of contravention of the Telecommunications Act and the TPA;

    (b)to mark the Court’s disapproval of the particular conduct engaged in by the respondent in contravention of the Telecommunications Act and the TPA; and

    (c)to set out clearly the foundation for the pecuniary penalty.

14. As to the injunctions sought, I do not propose to make any orders of the type sought by ACCC.  The injunctions are only sought for three years.  Whilst I consider that the penalty in this proceeding must be sufficient to ensure that Telstra, as well as the community, is reminded well into the future of the consequences of contravention, it is unlikely that Telstra will contravene in the proximate future.

15. Telstra has implemented a compliance program, which has not been criticised by the ACCC in this proceeding.  Telstra has co-operated with the ACCC in the way I have indicated.  I do not consider I need make an injunction in these circumstances.  The pecuniary penalties and declarations will stress the Court’s disapproval of the conduct of Telstra.

16. Therefore, it seems that the following orders are appropriate:

    1.A declaration that the Respondent contravened s 152AR(5)(c) of the Trade Practices Act 1974 (Cth) (‘TPA’), and thereby contravened a condition of its carrier licence and s 68(1) of the Telecommunications Act 1997 (Cth) (‘Telecommunications Act’), on each occasion that it rejected requests by service providers to permit interconnection of their facilities with Telstra’s facilities at the Bulwer, Carlton, Northcote, Paddington, Port Melbourne, South Perth and St Peters exchanges for the purpose of enabling the service providers to be supplied with the Unconditioned Local Loop Service or the Line Sharing Service (each of which is an active declared service for the purposes of Pt XIC of the TPA) by Telstra at those exchanges in order that the service providers could provide carriage services being:

    (a)in respect of the Bulwer exchange, on 5 September 2007, 12 September 2007 (on three occasions), 5 November 2007 and 18 December 2007;

    (b)in respect of the Carlton exchange, on 9 October 2007 and 12 December 2007;

    (c)in respect of the Northcote exchange, on 12 June 2007, 2 August 2007, 13 August 2007 and 7 September 2007;

    (d)in respect of the Paddington exchange, on 12 July 2006, 23 February 2007 and 5 February 2008;

    (e)in respect of the Port Melbourne exchange, on 23 January 2006, 31 August 2006, 5 February 2007, 26 July 2007 and 30 January 2008;

    (f)in respect of the South Perth exchange, on 29 August 2007, and 30 August 2007 (on two occasions); and

    (g)in respect of the St Peters exchange, on 25 January 2007, 31 May 2007, 18 September 2007 and 7 February 2008.

    2.A declaration that the Respondent contravened cl 17 of Sch 1 of the Telecommunications Act, and thereby contravened a condition of its carrier licence and s 68(1) of the Telecommunications Act, on each occasion that it rejected requests by service providers to permit carriers to access Telstra’s facilities at the Bulwer, Carlton, Northcote, Paddington, Port Melbourne, South Perth and St Peters exchanges being:

    (a)in respect of the Bulwer exchange, on 5 September 2007, 12 September 2007 (on three occasions) and 18 December 2007;

    (b)in respect of the Carlton exchange, on 9 October 2007 and 12 December 2007;

    (c)in respect of the Northcote exchange, on 12 June 2007, 13 August 2007 and 7 September 2007;

    (d)in respect of the Paddington exchange, on 12 July 2006, 23 February 2007 and 5 February 2008;

    (e)in respect of the Port Melbourne exchange, on 31 August 2006, 5 February 2007 and 26 July 2007;

    (f)in respect of the South Perth exchange, on 29 August 2007 and 30 August 2007 (on two occasions); and

    (g)in respect of the St Peters exchange, on 25 January 2007, 31 May 2007 and 18 September 2007.

    3.A declaration that the Respondent engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA by representing to service providers, on each occasion that the Respondent rejected requests by service providers to permit interconnection of their facilities with Telstra’s facilities at the Bulwer, Carlton, Northcote, Paddington, Port Melbourne, South Perth and St Peters exchanges as referred to in the first declaration herein, that there were no block positions on the Main Distribution Frame available to satisfy each of the service providers’ respective requests.

    4.A declaration that the Respondent engaged in conduct in trade or commerce that was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA by representing by the publication of its capped sites notices on the Telstra Wholesale website in respect of:

    (a)the Bulwer exchange for the period 1 September 2007 and 10 April 2008 (inclusive);

    (b)the Carlton exchange for the period 2 January 2008 to 10 April 2008 (inclusive);

    (c)the Northcote exchange for the period 1 September 2007 to 10 April 2008 (inclusive);

    (d)the Paddington exchange for the period 1 September 2007 to 31 October 2007 (inclusive) and 4 December 2007 to 10 April 2008 (inclusive);

    (e)the Port Melbourne exchange for the period 1 September 2007 to 10 April 2008 (inclusive);

    (f)the South Perth exchange for the period 1 September 2007 to 10 April 2008 (inclusive); and

    (g)the St Peters exchange for the period 1 September 2007 to 10 April 2008 (inclusive),

    that there was no longer space on the Main Distribution Frames at those exchanges that was available for service providers.

1. In addition an order will need to be made that Telstra pay to the Commonwealth pecuniary penalties in respect of each contravention of s 68(1) of the Telecommunications Act as alleged in the Amended Statement of Claim.

2. Each order will need to be formulated by reference to each of the 27 admitted contraventions by reference to the Amended Statement of Claim in accordance with s 570(1) of the Telecommunications Act, with each individual penalty reflecting the discount of 30%. I refer to the order made by Lockhart J in Bata Shoe (1980) ATPR 40-161 which could serve as a guide to the formulation of the appropriate orders.

3. I will make orders facilitating the preparing of minutes of orders, requiring the parties to confer, file and serve minutes of orders reflecting these reasons, and submissions as to costs (in the event of no agreement).

I certify that the preceding two hundred and eighty-eight (288) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton.

Associate:

Dated:       28 July 2010

SCHEDULE A

PROPOSED PECUNIARY PENALTY FOR EACH CONTRAVENTION

Details of access request	Date of contravening conduct	Date contravening conduct ceased	Relevant factors	Proposed penalty
Bulwer, WA    (6 refusals of access over a 7 month period)				$7 million
Agile 9082F01 PSR	4 Sep 2007	11 April 2008	PSR rejected notwithstanding large number of vacant line side blocks and no site visit; Decision resulted in capping of exchange on 5 September 2007 which also affected other carriers; capping continued after January 2008 and Telstra aware of significant capacity.	$1 million
Chime 9043F05 PSR	12 Sep 2007	5 Feb 2008	Conduct continued over a lengthy period; continuation of capping decision notwithstanding large number of vacant blocks and January 2008 audit that identified significant available space.	$1 million
Amcom 9016F03 PSR	12 Sep 2007	11 April 2008	Conduct continued over a lengthy period; continuation of capping decision; notwithstanding large number of vacant blocks and January 2008 audit that identified significant available space; further when Amcom asked for line side space no-one within Telstra investigated possibility of giving Amcom line side space even though space was plainly available.	$1.5 million
PowerTel 9033F02 PSR	12 Sep 2007	11 April 2008	Conduct continued over a lengthy period; continuation of capping decision notwithstanding large number of vacant blocks and January 2008 audit that identified significant available space.	$1 million
TPG 9117F02 PSR	5 Nov 2007	11 April 2008	Conduct continued over a lengthy period; continuation of capping decision notwithstanding large number of vacant blocks and January 2008 audit that identified significant available space.	$1 million
Chime 9043F06 PSR	18 Dec 2007	5 Feb 2008	Conduct continued for a shorter period; however, separate decision to refuse access even after Chime had investigated; patently unreasonable conditions imposed by Telstra on access that required Chime to remove a 2 km junction cable.	$1.5 million
Carlton, Vic  (2 refusals of access over a six month period)				$3.5 million
Chime 06C01 EIC DSR	9 Oct 2007	11 April 2008	Conduct continued for a lengthy period; once decision made; Telstra continued to refuse access notwithstanding photographic evidence from Chime that space was readily available; Telstra demanded Chime bear cost of a compression, then informed Chime that Telstra would neither compress the MDF nor allow Chime to do so - even though such a compression was consistent with Telstra’s policies; capacity decision made on 2 January 2008 and continued even though capacity identified in February 2008.	$2.25 million
Agile 59C01 EIC DSR	12 Dec 2007	11 April 2008	Conduct continued for a shorter period; continuation of decision that there was no capacity on the MDF without any investigation; capping decision made on 2 January 2008 and continued even though capacity identified in February 2008.	$1.25 million
Northcote, Vic   (4 refusals of access over a 10 month period)				$6 million
Chime 9138F05 PSR	12 Jun 2007	11 April 2008	Conduct continued for a lengthy period; rejection resulted in a capping decision that affected many access seekers; space was available at the time of rejection; email showing capacity sent to Smith two hours before it was capped; decision to cap made in 12 minutes; Telstra was made aware of significant available space through an audit conducted on 19 October 2007, capping did not cease for another six months.	$1.5 million
TPG 9049F03 PSR	2 Aug 2007	11 April 2008	Conduct continued for a lengthy period; rejection a continuation of capping decision made when space available; Telstra was made aware of significant available space through an audit conducted on 19 October 2007, but capping did not cease for another six months.	$1.5 million
PowerTel 9226F01 PSR	13 Aug 2007	11 April 2008	Conduct continued for a lengthy period; rejection a continuation of capping decision made when space available; Telstra was made aware of significant available space through an audit conducted on 19 October 2007, but capping did not cease for another six months.	$1.5 million
Agile 9093F01 PSR	7 Sep 2007	11 April 2008	Conduct continued for a lengthy period; rejection a continuation of capping decision made when space available; Telstra was made aware of significant available space through an audit conducted on 19 October 2007, but capping did not cease for another six months.	$1.5 million
Paddington, Qld  (3 refusals of access over a 21 month period)				$6.5 million
Optus 9209F05 PSR	12 Jul 2006	14 April 2008	Conduct continued for a very lengthy period; decision to reject made when substantial capacity on the line side; inconsistent conduct between access seekers – Telstra allowed TPG and PowerTel to gain access in July and September 2006 respectively after access refused to Optus.	$3 million
Optus 9209F06 PSR	23 Feb 2007	11 April 2008	Conduct continued for a lengthy period; decision to reject made when significant available capacity and two other access seekers had recently gained access; inconsistent conduct between access seekers.	$2.5 million
EFTel 9066F01 PSR	5 Feb 2008	11 April 2008	Conduct continued for a shorter period; rejection a continuation of earlier capping decision in September 2007 notwithstanding available capacity.	$1 million
Port Melbourne, Vic  (5 refusals of access over a 27 month period)				$8 million
TPG 9145F01 PSR	23 Jan 2006	December 2006	Conduct continued for a lengthy period; initial rejection decision made without any consideration of line side capacity; TPG subsequently obtain approval for access in or about December 2006; Telstra treated TPG unfairly by allowing Agile to enter exchange first in October 2006 despite applying second.	$2.5 million
Agile 9075F01 PSR	31 Aug 2006	19 October 2006	Conduct continued for a shorter period; access only granted after investigation by Agile and request for re-assessment.	$1 million
Chime 9255F02 PSR	5 Feb 2007	11 April 2008	Conduct continued for a lengthy period; PSR rejected even though Agile had been given access earlier; Telstra conducted rationalisation in July 2007 which resulted in available space and yet rejected the PSR and continued the exchange capping and access refusals for a further nine months.	$1.75 million
PowerTel 9216F01 PSR	26 Jul 2007	11 April 2008	Conduct continued for a lengthy period; PSR rejected even though Agile had been given access earlier; Telstra conducted rationalisation in July 2007 which resulted in available space and yet rejected the PSR and continued the exchange capping and access refusals for a further nine months.	$1.75 million
TPG 9145F02 PSR	30 Jan 2008	11 April 2008	Conduct continued for a shorter period; PSR rejected even though Agile had been given access earlier; Telstra conducted rationalisation in July 2007 which resulted in available space and yet rejected the PSR and continued the exchange capping and access refusals for a further nine months.	$1 million
South Perth, WA  (3 refusals of access over an 8 month period)				$4 million
Chime 9054F04	29 Aug 2007	10 October 2007	Conduct continued for a shorter period; PSR rejected when substantial space available; Chime undertook own inspection,; Telstra did not respond until notified twice then approved Chime’s request; after approving Chime’s PSR Telstra did not reconsider capping	$1 million
PowerTel 9194F01 PSR	30 Aug 2007	11 April 2008	Conduct continued for a lengthy period; PSR rejected and exchange capped when substantial space was available.	$1.5 million
Primus 9333F01 PSR	30 Aug 2007	11 April 2008	Conduct continued for a lengthy period; PSR rejected and exchange capped when substantial space was available.	$1.5 million
St Peters, SA  (4 refusals of access over an 15 month period)				$5 million
Adam Internet 9010F02 PSR	25 Jan 2007	8 February 2007	Conduct continued for a short period; PSR initially rejected when substantial vacant block positions and there was a Telstra reservation in place for extraordinary and unrealistic DSL growth; Adam Internet eventually gained access when it reduced its request for block positions; exchange remained capped after audit in October 2007 identified available block positions.	$1 million
Primus 9299F01 PSR	31 May 2007	11 April 2008	Conduct continued for a lengthy period; PSR rejected and exchange capped when spare verticals available; exchange remained capped after audit in October 2007 identified available block positions.	$2 million
Agile 9040F02 PSR	18 Sep 2007	5 October 2007	Conduct continued for a short period, but Agile allocated less block positions than requested when substantial unused space available.	$1 million
TPG 9349F01 PSR	7 Feb 2008	11 April 2008	Conduct continued for a shorter period; no access granted when substantial space available.	$1 million
Total penalty				$40 million
Total penalty with 15% discount ($6M)				$34 million