Foxtel Management Pty Ltd v Australian Competition and Consumer Commission
[2000] FCA 589
•8 MAY 2000
FEDERAL COURT OF AUSTRALIA
Foxtel Management Pty Ltd v Australian Competition & Consumer Commission [2000] FCA 589
TELECOMMUNICATIONS – Promotion of competition in relation to analogue cable television programs – Facilitation of access under Part XIC of Trade Practices Act 1974 – Purported 1997 specification by Australian Competition and Consumer Commission (“ACCC”) pursuant to transitional legislation – Specification statement included not only analogue distribution service but also three optional adjunct services: network management access function, conditional access function and subscriber premises servicing function – Challenge to validity of specification – Whether validity ought to be considered having regard to delay – Effect of ACCC’s omission to publish full copy of statement in Gazette – Whether ACCC was empowered to specify multiple services – Whether specification is uncertain – Whether the specified service (or any one of multiple services) is not an “eligible service” or not “necessary” for the purpose of enabling the supply of a broadcasting service – Severance of invalid elements – 1999 declaration under Part XIC of Trade Practices Act – Validity – Whether ACCC’s power exhausted by 1997 specification – Whether improper exercise of power – Alleged failure to take into account relevant considerations – Alleged taking account of irrelevant considerations – Alleged predetermination – Alleged error of law – Whether no evidence to support conclusions – Failure to make inquiries – Alleged unreasonableness – Whether FOXTEL is a “carriage service provider”.
Trade Practices Act 1974, ss152AB, 152AG, 152AH, 152AL and 152AR
Telecommunications (Transitional Provisions and Consequential Amendments) Act 1997, s39
Telecommunications Act1997, ss87, 88, 93 and 97
Administrative Decisions (Judicial Review) Act 1977, s5
Acts Interpretation Act 1901, ss23(b), 33(1) and 46(1)(b)FOXTEL MANAGEMENT PTY LIMITED v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
N1088 of 1999
FOXTEL MANAGEMENT PTY LIMITED v AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
N1150 of 1999
SEVEN CABLE TELEVISION PTY LIMITED v TELSTRA CORPORATION LIMITED & ORS
N1095 of 1999
FOXTEL MANAGEMENT PTY LIMITED & ANOR v SEVEN CABLE TELEVISION PTY LIMITED & ORS
N217 of 2000
WILCOX J
SYDNEY8 MAY 2000
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N1088 of 1999
BETWEEN:
AND:
FOXTEL MANAGEMENT PTY LIMITED
ApplicantAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
RespondentJUDGE:
WILCOX J
DATE OF ORDER:
8 MAY 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.It be declared that the declaration made by Australian Competition and Consumer Commission under s152AL(3) of the Trade Practices Act 1974, concerning the analogue subscription television broadcast carriage service, that was notified in the Commonwealth of Australia Gazette dated 8 September 1999 is valid and effective in law.
2.The applicant, Foxtel Management Pty Limited, pay the costs incurred by the respondent, Australian Competition and Consumer Commission, in respect of this proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N1150 of 1999
BETWEEN:
AND:
FOXTEL MANAGEMENT PTY LIMITED
ApplicantAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
RespondentJUDGE:
WILCOX J
DATE OF ORDER:
8 MAY 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1. It be declared that the statement dated 30 June 1997 entitled “Deeming of Telecommunications Services: A statement pursuant to section 39 of the Telecommunications (Transitional Provisions and Consequential Amendments) Act 1997” is valid and effective in law to the extent, and only to the extent, that it specifies as an access service the following service:
“The service, being an analogue service supplied by an (access provider), necessary for the purposes of enabling the supply by an (access seeker) of a broadcasting service by means of line links that deliver signals to end-users, and of a kind that was used for those purposes on 13 September 1996”.
2.The applicant, Foxtel Management Pty Limited, pay one half of the costs incurred by the respondent, Australian Competition and Consumer Commission, in respect of this proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N1095 of 1999
BETWEEN:
AND:
SEVEN CABLE TELEVISION PTY LIMITED
ApplicantTELSTRA CORPORATION LIMITED
First RespondentTELSTRA MULTIMEDIA PTY LIMITED
Second RespondentTELSTRA MEDIA PTY LIMITED
Third RespondentTHE NEWS CORPORATION LIMITED
Fourth RespondentNEWS LIMITED
Fifth RespondentSKY CABLE PTY LIMITED
Sixth RespondentFOXTEL MANAGEMENT PTY LIMITED
Seventh Respondentand
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Eighth RespondentFOXTEL MANAGEMENT PTY LIMITED
First Cross ClaimantSKY CABLE PTY LIMITED
Second Cross ClaimantSEVEN CABLE TELEVISION PTY LIMITED
First Cross Respondent to First Cross ClaimTELSTRA MULTIMEDIA PTY LIMITED
Second Cross Respondent to First Cross ClaimAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Third Cross Respondent to First Cross ClaimTELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA LTD
Fourth Cross Respondent to First Cross Claimand
TELSTRA MEDIA PTY LIMITED
Fifth Cross Respondent to First Cross ClaimTELSTRA CORPORATION LIMITED, TELSTRA MULTIMEDIA PTY LIMITED and TELSTRA MEDIA PTY LIMITED
Second Cross ClaimantsSEVEN CABLE TELEVISION PTY LIMITED
First Cross Respondent to Second Cross ClaimTELEVISION & RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Cross Respondent to Second Cross ClaimFOXTEL MANAGEMENT PTY LIMITED
Third Cross Respondent to Second Cross ClaimAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Fourth Cross Respondent to Second Cross ClaimJUDGE:
WILCOX J
DATE OF ORDER:
8 MAY 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS IN RELATION TO THE CROSS CLAIMS THAT:
1. It be declared that the statement dated 30 June 1997 and entitled “Deeming of Telecommunications Services: A statement pursuant to section 39 of the Telecommunications (Transitional Provisions and Consequential Amendments) Act 1997” is valid and effective in law to the extent, and only to the extent, that it specifies as an access service the following service:
“The service, being an analogue service supplied by an (access provider), necessary for the purposes of enabling the supply by an (access seeker) of a broadcasting service by means of line links that deliver signals to end-users, and of a kind that was used for those purposes on 13 September 1996”.
2.It be declared that the declaration made by Australian Competition and Consumer Commission under s152AL(3) of the Trade Practices Act 1974, concerning the analogue subscription television broadcast carriage service, that was notified in the Commonwealth of Australia Gazette dated 8 September 1999 is valid and effective in law.
3. The cross claimants, Foxtel Management Pty Limited, Sky Cable Pty Limited, Telstra Corporation Limited, Telstra Multimedia Pty Limited and Telstra Media Pty Limited, pay to the cross respondents, Seven Cable Television Pty Limited, Australian Competition and Consumer Commission and Television & Radio Broadcasting Services Australia Pty Limited, 75% of the costs incurred by them in connection with the cross claims.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N217 of 2000
BETWEEN:
AND:
FOXTEL MANAGEMENT PTY LIMITED
First ApplicantFOXTEL CABLE TELEVISION PTY LTD
Second ApplicantSEVEN CABLE TELEVISION PTY LIMITED
First RespondentTELEVISION & RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondentand
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Third RespondentJUDGE:
WILCOX J
DATE OF ORDER:
8 MAY 2000
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.It be declared that the applicants, Foxtel Management Pty Limited and Foxtel Cable Television Pty Limited, the suppliers of the service known as “FOXTEL subscription television service”, together constitute a “carriage service provider” within the meaning and for the purposes of the Telecommunications Act1997.
2.The said applicants pay the costs of the respondents, Seven Cable Television Pty Limited and Television Radio Broadcasting Services Australia Pty Limited, incurred in connection with this proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
N1088 of 1999
BETWEEN:
FOXTEL MANAGEMENT PTY LIMITED
ApplicantAND:
BETWEEN:
AND:
BETWEEN:
AND:
BETWEEN:
AND:
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
RespondentN1150 of 1999
FOXTEL MANAGEMENT PTY LIMITED
ApplicantAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
RespondentN1095 of 1999
SEVEN CABLE TELEVISION PTY LIMITED
ApplicantTELSTRA CORPORATION LIMITED
First RespondentTELSTRA MULTIMEDIA PTY LIMITED
Second RespondentTELSTRA MEDIA PTY LIMITED
Third RespondentTHE NEWS CORPORATION LIMITED
Fourth RespondentNEWS LIMITED
Fifth RespondentSKY CABLE PTY LIMITED
Sixth RespondentFOXTEL MANAGEMENT PTY LIMITED
Seventh Respondentand
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Eighth RespondentFOXTEL MANAGEMENT PTY LIMITED
First Cross ClaimantSKY CABLE PTY LIMITED
Second Cross ClaimantSEVEN CABLE TELEVISION PTY LIMITED
First Cross Respondent to First Cross ClaimTELSTRA MULTIMEDIA PTY LIMITED
Second Cross Respondent to First Cross ClaimAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Third Cross Respondent to First Cross ClaimTELEVISION AND RADIO BROADCASTING SERVICES AUSTRALIA LTD
Fourth Cross Respondent to First Cross Claimand
TELSTRA MEDIA PTY LIMITED
Fifth Cross Respondent to First Cross ClaimTELSTRA CORPORATION LIMITED, TELSTRA MULTIMEDIA PTY LIMITED and TELSTRA MEDIA PTY LIMITED
Second Cross ClaimantsSEVEN CABLE TELEVISION PTY LIMITED
First Cross Respondent to Second Cross ClaimTELEVISION & RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Cross Respondent to Second Cross ClaimFOXTEL MANAGEMENT PTY LIMITED
Third Cross Respondent to Second Cross ClaimAUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Fourth Cross Respondent to Second Cross ClaimN217 of 2000
FOXTEL MANAGEMENT PTY LTD
First ApplicantFOXTEL CABLE TELEVISION PTY LTD
Second ApplicantSEVEN CABLE TELEVISION PTY LIMITED
First RespondentTELEVISION & RADIO BROADCASTING SERVICES AUSTRALIA PTY LIMITED
Second Respondentand
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Third Respondent
JUDGE:
WILCOX J
DATE:
8 MAY 2000
PLACE:
SYDNEY
REASONS FOR JUDGMENT
WILCOX J: These reasons for judgment relate to four proceedings, all of which are concerned with access by program providers to cable television facilities. The reasons are paragraphed as follows:
The proceedings 2 to 11
The facts
(i) The contractual framework 12 to 18
(ii) The FOXTEL system in operation 19 to 23
The statutory provisions
(i) Trade Practices Act 24 to 47
(ii) The 1997 transitional Act 48 to 49
The 1997 deeming statement
(i) The facts 50 to 60
(ii) The bases of challenge 61 to 65
(iii) Delay in challenge 66 to 68
(iv) The effect of non-publication in the Gazette 69 to 81
(v) The legitimacy of reference to Attachment B 82 to 88
(vi) Whether Attachment B is uncertain 89 to 98
(vii)The effect of adding optional adjunct services:
if the statement refers to a single service: uncertainty 99 to 103
(viii)The effect of adding optional adjunct services:
if the statement refers to multiple services: power 104 to 106
(ix)The effect of adding optional adjunct services:
if the statement refers to multiple services:
“eligible service” and uncertainty 107 to 116(x)The effect of adding optional adjunct services:
if the statement refers to multiple services: necessity 117 to 133
(xi)Severability 134 to 140
(xii)Conclusion about validity 141 to 142
The 1999 declaration
(i)The ACCC report 143 to 160
(ii)Admissibility of Professor Williams’ evidence 161 to 175
(iii)The Telstra contention: no second exercise of power 176 to 183
(iv)Foxtel’s contentions 184 to 185
(v)Failure to take into account relevant considerations 186 to 195
(vi)Taking into account an irrelevant consideration 196 to 197
(vii)Predetermination 198 to 199
(viii)Error of law 200 to 206
(ix)No evidence 207 to 213
(x)Failure to make inquiries 214 to 215
(xi)Unreasonableness 216 to 218
(xii)Conclusion on 1999 declaration 219 to 220
Is Foxtel a “carriage service provider”
(i) Background 221 to 225
(ii) Section 87(1) of Telecommunications Act 226 to 243
(iii) Section 87(5) of Telecommunications Act 244 to 250
Disposition
(i)Orders in matter N1095 of 1999 251
(ii)Costs 252 to 255
The proceedings
Two of the proceedings involve only two parties, Foxtel Management Pty Limited (“Foxtel Management”) as applicant and Australian Competition and Consumer Commission (“ACCC”) as respondent.
The first of those proceedings (N1088 of 1999) is brought under the Administrative Decisions (Judicial Review) Act 1977. In that proceeding Foxtel Management challenges, on various grounds, the validity in law of a declaration made by ACCC under s152AL(3) of the Trade Practices Act 1974 “that the Analogue Subscription Television Broadcast Carriage Service (described in Annexure A) is a ‘declared service’ for the purposes of Part XIC of the Act”. The declaration was stated to take effect on the day on which it was notified in the Commonwealth of Australia Gazette (“the Gazette”), which was 8 September 1999. The effect of the declaration (if it is valid) is to subject analogue subscription television broadcast carriage services (sometimes called “pay TV”) to the competition regime set out in Part XIC of the Trade Practices Act.
The second proceeding (N1150 of 1999) is brought by Foxtel Management pursuant to s39B(1A) of the Judiciary Act 1903. That proceeding seeks review of a decision of ACCC recorded in a document dated 30 June 1997 and entitled “Deeming of Telecommunications Services: A statement pursuant to section 39 of the Telecommunications (Transitional Provisions and Consequential Amendments) Act 1997”. If it is valid, the effect of that decision is to create access rights, under Part XIC of the Trade Practices Act, to the analogue cable television broadcasting system and certain adjunct services.
The rights made available to third parties by a declaration under Part XIC of the Trade Practices Act are subject to certain qualifications. One qualification is that Part XIC does not impose on carriers and carriage service providers an obligation that would have the effect of “depriving any person of a protected contractual right”: see s152AR(4)(d) of the Act. The term “protected contractual right” is defined by s152AR(12) as meaning “a right under a contract that was in force at the beginning of 13 September 1996” (the date of release of an exposure draft of proposed legislation).
Seven Cable Television Pty Limited (“Seven Cable”) sought to take advantage of the declaration made by ACCC in September 1999. Apparently it gave an appropriate notice to Telstra Multimedia Pty Limited (“Telstra Multimedia”), a company concerned with the operation of the FOXTEL cable television service. However, Telstra Multimedia took the position that no obligation was imposed on it under Part XIC because of a protected contractual right arising out of an arrangement between companies associated with The News Corporation Limited (“News Corporation”) and Telstra Corporation Limited (“Telstra Corporation”).
In order to test the claim of protected contractual right, on 23 September 1999 Seven Cable instituted proceeding N1095 of 1999. It named as respondents Telstra Corporation, Telstra Multimedia, Telstra Media Pty Limited (“Telstra Media”), News Corporation, News Limited, Sky Cable Pty Limited (“Sky Cable”, a company in the News group) and Foxtel Management. Foxtel Management is owned partly (50%) by Telstra Corporation, partly (25%) by Sky Cable and partly (25%) by Publishing and Broadcasting Limited. The applicant sought two declarations, both of which were concerned with the claimed protected contractual right.
In October 1999 two cross claims were filed in this proceeding; one by Foxtel Management and Sky Cable, the other by the three Telstra respondents. The cross respondents named in the cross claims included Seven Cable, Television and Radio Broadcasting Services Australia Pty Limited (“TARBS”, another access seeker) and ACCC. Each cross claim raised issues about the validity of the 1997 deeming statement and the 1999 declaration. These were the same issues as were raised in proceedings N1088 of 1999 and N1150 of 1999, both of which had been assigned to my docket.
Proceeding N1095 of 1999 was assigned to Tamberlin J. However, the parties recognised the inappropriateness of two judges each being concerned with the validity of the deeming statement and declaration. They suggested to Tamberlin J that the issues raised by the cross claims, which they referred to as the “public law” aspects of the proceeding before his Honour, should be referred to me, whilst Tamberlin J retained and heard the protected contractual right (“private law”) issue. Tamberlin J assented to that suggestion. On 28 January 2000 he made a direction in the following terms:
“4. Issues dealing with the validity of:
(a)the statement dated 30 June 1997 under which the Australian Competition & Consumer Commission (“ACCC”) purported to specify a broadcasting access service as an eligible service pursuant to section 39 of the Telecommunications (Transitional Provisions & Consequential Amendment) Act 1997 (Cth); and
(b)the instrument dated 1 September 1999 and gazetted on 8 September 1999 under which the ACCC purported to declare an analogue subscription television broadcast service pursuant to section 152AL(3) of the Trade Practices Act 1974,
including the issues raised by paragraphs 33 to 42 inclusive of the Amended Cross Claim of Foxtel Management Pty Limited and Sky Cable Pty Limited be tried at the same time as proceedings Nos. N1088 of 1999 and N1150 of 1999.”
On 27 March 2000 Tamberlin J delivered reasons for judgment in respect of the portion of N1095 of 1999 he had retained: see Seven Cable Television Pty Ltd v Telstra Corporation Ltd [2000] FCA 350. His Honour held there was no relevant protected contractual right. On 31 March 2000 Tamberlin J made the following declarations:
“THE COURT:
1.Declares that the Respondents (or any of them) do not have a ‘protected contractual right’ within the meaning of that term as used in section 152AR(4)(d) of the Trade Practices Act 1974, in relation to the declared services requested by the Applicant and by Television & Radio Broadcasting Services Australia Pty Limited.
2.Declares that the supply of the declared services requested by the Applicant and by Television & Radio Broadcasting Services Australia Pty Limited will not have the effect that the Respondents (or any of them) will be deprived of a ‘protected contractual right’ within the meaning of that term as used in section 152AR(4)(d) of the Trade Practices Act 1974.”
The fourth proceeding (N217 of 2000) was instituted on 14 March 2000. During the hearing of the three earlier proceedings, it became clear Foxtel Management was contending, not only that the 1997 deeming statement and 1999 declaration were invalid, but that those instruments had no application to the service Foxtel Management conducts in conjunction with Foxtel Cable Television Pty Limited (“Foxtel Cable”). In order to regularise the situation procedurally, without opposition from any party, I gave leave to Foxtel Management and Foxtel Cable to make instantly returnable a new application seeking appropriate declarations. This was done. During the course of the hearing, the applicants amended the form of the proposed relief. Ultimately, they sought only one declaration:
“A declaration that neither the first nor second applicant is a ‘carrier’ or ‘carriage service provider’ within the meaning of and for the purposes of the Telecommunications Act 1997.”
The facts
(i)The contractual framework
The subscription television service known as “FOXTEL” is based on a complex of, at least, three agreements. The earliest of the three agreements is an “Umbrella Agreement” between News Corporation and Telstra Corporation made on 9 March 1995. It was amended and restated on 14 April 1997. The purpose of the agreement was to state the terms of an “Alliance” between the two companies, whose objectives include the establishment, through joint venture entities, of “leading businesses within the broadband video home entertainment sector in Australia”. The agreement identifies the “Services” within the scope of the Alliance, including providing “to a Residential Subscriber either a Video Program on a Television … via a Set-Top Unit or an Audio Program via a Set-Top Unit”. The parties agreed that Telstra Corporation and Telstra Multimedia must be the exclusive supplier of all broadbanding services used by any joint venture entity. The agreement details Telstra Corporation’s responsibility to provide broadband access to homes and the financial obligations and entitlements of the parties.
On 14 April 1997 two subsidiary agreements were executed. The first of them, called “Foxtel Partnership Agreement”, was made between Sky Cable, Telstra Media and Foxtel Management. It provides for Sky Cable and Telstra Media to carry on the FOXTEL business in partnership. Foxtel Management, a company controlled by a board comprising the Chief Executive Officer and three directors appointed by each partner, is appointed the partners’ exclusive agent to manage the business.
The other agreement of 14 April 1997 is called “Broadband Co-operation Agreement”. The parties to this agreement are Telstra Multimedia and Foxtel Management, acting on behalf of the Foxtel Partnership referred to above. This agreement deals in detail with the provision of broadband facilities by Telstra Multimedia to FOXTEL.
The evidence also includes a copy of the standard terms and conditions that govern the supply by FOXTEL to subscribers of residential cable television. In the document, the word “FOXTEL” is a reference to Foxtel Cable: see cl 15.6. The acronym “TMPL” refers to Telstra Multimedia: see cl 15.16. The word “Service” is defined as “the provision of Channels”: see cl 15.13. “Channels” means “the programming package which you have requested and FOXTEL has agreed to supply”: see cl 15.3. “Retransmitted Free-to-Air Broadcasts” are the programs of the subscriber’s local commercial television stations and the Australian Broadcasting Corporation and Special Broadcasting Service, where available: see cl 13.1.
The key obligation undertaken by FOXTEL towards subscribers is expressed in cl 1.1 in these terms:
“FOXTEL will provide the Channels and FOXTEL Management will provide the Retransmitted Free-to-Air Broadcasts to you. FOXTEL and FOXTEL Management will use reasonable skill and care in providing the Channels and Retransmitted Free-to-Air Broadcasts (as applicable). FOXTEL may vary Channel content or transmission times, the Channels that make up the Services or stop providing Channels without notice. FOXTEL is not liable for any loss or disappointment you may suffer as a result.”
Clause 2.1 contains a permit by Foxtel Cable for the subscriber “to use FOXTEL’s Equipment in accordance with the terms of this Agreement”. The term “FOXTEL’s Equipment” is defined by cl 15.7 as meaning “the set-top unit, the remote control, the cabling from the wall plate to the set-top unit and from the set-top unit to your television or video equipment and any other equipment added or substituted by FOXTEL …” By cl 2.1 this equipment remains the property of Foxtel Cable.
Clause 5 deals with ownership and use of “the Facilities”; a term defined by cl 15.4 as “the equipment and facilities installed to your home to be used to supply the Channels and the Retransmitted Free-to-Air Broadcasts, including optical fibre, coaxial cable, ducts, conduits and the wall plate but excluding FOXTEL’s Equipment”. The Facilities and the smart card remain the property of Telstra or Telstra Multimedia (cl 5.1).
(ii)The FOXTEL system in operation
The evidence includes an affidavit of Peter Glen Smart, Foxtel Management’s Director of Engineering and Technology, in which he describes the operation of the FOXTEL system. There was no challenge to the accuracy of Mr Smart’s account. Apparently Mr Smart gave similar evidence before Tamberlin J. His Honour summarised that evidence at paras 10 to 17 of his judgment. There is no need for me to repeat the summary. However, a short description may be helpful.
Mr Smart said there were two components to FOXTEL’s business that permit it to offer pay television services to subscribers: first, the supply of programs for broadcast and, second, the provision of information and associated facilities which confine subscribers’ program access to the channels to which they have subscribed. The first component is called “the program signal”. The second, consisting of the subscriber’s unique smart card number and the subscriber’s program entitlements, is called “conditional access data”. Both streams of information are provided by the Foxtel companies and transmitted to subscribers’ reception equipment.
FOXTEL operates a play out centre at Pyrmont, Sydney. Programs are there assembled as a continuous stream of information. From Pyrmont the programs are broadcast in digital form to headends located in Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth. For this purpose FOXTEL uses the hybrid fibre coaxial (“HFC”) network owned by Telstra Multimedia. At each headend the program signal is converted to an analogue signal, encrypted and combined with the conditional access data, which is in digital form. The combined information stream is then broadcast to subscribers over the Telstra HFC network, which currently passes about 2.5 million homes in Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Perth.
If a person wishes to subscribe to FOXTEL, and the network passes the person’s home but is not already connected to a wall plate on the person’s property, it will be connected by a lead in cable to a wall plate. The lead in cable and wall plate are installed by Telstra Multimedia. Beyond the wall plate, FOXTEL equipment is used to connect the new subscriber to the HFC network: fly cables that connect the wall plate to the set top unit, and the set top unit to the subscriber’s television receiver, and the set-top unit itself.
Mr Smart described the function of the set top unit in this way:
“The set top unit normally sits on or by the subscriber’s television receiver. The set top unit receives the combined information stream from the HFC network. In conjunction with the smart card, the set top unit decrypts the program signal component of the combined information stream in accordance with the subscriber’s entitlements. The program signal is transmitted by the set top unit to the subscriber’s television receiver.”
The statutory provisions
(i)Trade Practices Act
The legislative provisions relevant to these proceedings are scattered amongst a number of statutes, requiring extensive cross-referencing. It is convenient to commence with Part XIC of the Trade Practices Act. This Part was introduced into the Trade Practices Act by the Trade Practices Amendment (Telecommunications) Act 1997. It came into effect on 30 April 1997.
Division 1 of Part XIC is an introduction to the Part. It commences with s152AA, which sets out a “simplified outline” of the Part, as follows:
“. This Part sets out a telecommunications access regime.
.The Commission may declare carriage services and related services to be ‘declared services’.
.Carriers and carriage service providers who provide declared services are required to comply with ‘standard access obligations’ in relation to those services.
.The ‘standard access obligations’ facilitate the provision of access to declared services by service providers in order that service providers can provide carriage services and/or content services.
.The terms and conditions on which carriers and carriage service providers are required to comply with the ‘standard access obligations’ are subject to agreement.
.If agreement cannot be reached, but the carrier or carriage service provider has given an ‘access undertaking’, the terms and conditions are as set out in the access undertaking.
.If agreement cannot be reached, but no access undertaking is in operation, the terms and conditions are to be determined by the Commission acting as an arbitrator.
.An access undertaking may adopt the terms and conditions set out in a ‘telecommunications access code’.
.The Commission may conduct an arbitration of a dispute about access to declared services. The Commission’s determination on the arbitration must not be inconsistent with the standard access obligations or an access undertaking.
.The Commission may register agreements about access to declared services.
.A carrier, carriage service provider or related body must not prevent or hinder access to a declared service.”
The emphasised words are defined terms.
Section 152AB sets out the objects of the Part. Relevantly it provides:
“(1)The object of this Part is to promote the long-term interests of end-users of carriage services or of services provided by means of carriage services.
(2)For the purposes of this Part, in determining whether a particular thing promotes the long-term interests of end-users of either of the following services (the ‘listed services’):
(a)carriage services;
(b)services supplied by means of carriage services;
regard must be had to the extent to which the thing is likely to result in the achievement of the following objectives:
(c)the objective of promoting competition in markets for listed services;
(d)…
(e)the objective of encouraging the economically efficient use of, and the economically efficient investment in, the infrastructure by which listed services are supplied.
(3)Subsection (2) is intended to limit the matters to which regard may be had.
(4)In determining the extent to which a particular thing is likely to result in the achievement of the objective referred to in paragraph (2)(c), regard must be had to the extent to which the thing will remove obstacles to end-users of listed services gaining access to listed services.
(5)Subsection (4) does not, by implication, limit the matters to which regard may be had.
(6)In determining the extent to which a particular thing is likely to result in the achievement of the objective referred to in paragraph (2)(e), regard must be had to the following matters:
(a)whether it is technically feasible for the services to be supplied and charged for, having regard to:
(i)the technology that is in use or available; and
(ii)whether the costs that would be involved in supplying, and charging for, the services are reasonable; and
(iii)the effects, or likely effects, that supplying, and charging for, the services would have on the operation or performance of telecommunications networks;
(b)the legitimate commercial interests of the supplier or suppliers of the services, including the ability of the supplier or suppliers to exploit economies of scale and scope;
(c)the incentives for investment in the infrastructure by which the services are supplied.
(7)Subsection (6) does not, by implication, limit the matters to which regard may be had.
(8)…”
The term “carriage service” has the same meaning in Part XIC as in the Telecommunications Act1997 and includes a proposed carriage service: see s152AC of the Trade Practices Act. In the Telecommunications Act, “carriage service” means “a service for carrying communications by means of guided and/or unguided electromagnetic energy”. It is common ground that the service by which the information streams generated by FOXTEL are carried to subscribers’ television sets is a “carriage service” within this definition. It is also common ground that this is a “listed carriage service”, a term that includes “a carriage service between a point in Australia and one or more other points in Australia”: see s16 of the Telecommunications Act.
A key concept in Part XIC is that of “access seeker”, a term described in s152AG. A person is taken to be an “access seeker”, in relation to a declared service, if three conditions are fulfilled. First, the person must be a “service provider”, within the meaning of the Telecommunications Act – see the definition in s152AC of the Trade Practices Act - that is, “a carriage service provider” or “a content service provider”: see s86 of the Telecommunications Act. The term “carriage service provider” is defined by s87 of the Telecommunications Act. It is common ground that Telstra Multimedia is a “carriage service provider” but Foxtel Management and Foxtel Cable dispute that either of them has that status. I will return to the s87 definition in considering that issue.
Section 97 of the Telecommunications Act defines the term “content service provider” in this way:
“(1)For the purposes of this Act, if a person uses, or proposes to use, a listed carriage service to supply a content service to the public, the person is a content service provider.
(2)For the purposes of subsection (1), a content service is supplied to the public if, and only if, at least one end-user of the content service is outside the immediate circle of the supplier of the content service.”
The term “content service” is defined by s15 of the Telecommunications Act in such a manner as to include “a broadcasting service”. By s7, that term bears the same meaning as in the Broadcasting Services Act 1992 viz:
“a service that delivers television programs or radio programs to persons having equipment appropriate for receiving that service, whether the delivery uses the radiofrequency spectrum, cable, optical fibre, satellite or any other means or a combination of those means, …”
The definition contains some presently irrelevant exclusions.
In reading the definition of “broadcasting service” in s6 of the Broadcasting Services Act, it is necessary to bear in mind the meaning of “program” in that Act. This is also set out in s6 viz:
“(a)matter the primary purpose of which is to entertain, to educate or to inform an audience; or
(b)advertising or sponsorship matter, whether or not of a commercial kind.”
Both Foxtel Cable and Foxtel Management accept that they fall within the definition of “content service provider” provided by s97 of the Telecommunications Act, and so within the meaning of that term in Part XIC of the Trade Practices Act. In the case of Foxtel Cable, this is because it provides subscription programs. In the case of Foxtel Management, it is because it uses the cable service to supply retransmitted free-to-air programs.
All parties accept that Seven Cable and TARBS also fall within the definition of “content service provider”; each company proposes to use the broadband cable (a “listed carriage service”) to supply a “content service”, that is a “broadcasting service” that delivers television programs to the public. It follows that each company is also a “service provider” within the meaning of the Telecommunications Act.
The second requirement, if a particular person is to be regarded as an “access seeker” in relation to a particular declared service – that is a service declared by ACCC under Part XIC - is that the person must wish to have access to that service, or to change existing access arrangements: see s152AG(3) of the Trade Practices Act.
Finally, the person must have requested, or must propose to request, access to the service under s152AR of the Trade Practices Act: see s152AG(2).
It is common ground that both Seven Cable and TARBS wish to have access to the service described in each of the 1997 deeming statement and the 1999 declaration and have made requests for access. It follows that Seven Cable and TARBS is each to be regarded as an “access seeker” for the purposes of Part XIC.
Section 152AH(1) of the Trade Practices Act sets out six matters to which regard must be had in determining whether particular terms and conditions are reasonable. They are:
“(a)whether the terms and conditions promote the long-term interests of end-users of carriage services or of services supplied by means of carriage services;
(b)the legitimate business interests of the carrier or carriage service provider concerned, and the carrier’s or provider’s investment in facilities used to supply the declared service concerned;
(c)the interests of persons who have rights to use the declared service concerned;
(d)the direct costs of providing access to the declared service concerned;
(e)the operational and technical requirements necessary for the safe and reliable operation of a carriage service, a telecommunications network or a facility;
(f)the economically efficient operation of a carriage service, a telecommunications network or a facility.”
Section 152AH(2) provides that subsection (1) does not, by implication, limit the matters to which regard may be had.
Division 2 of Part XIC relates to the declaration of services. Declarations are made by ACCC. They may be made on the recommendation of the Telecommunications Access Forum, an industry body constituted under s152AI of the Trade Practices Act: see s152AL(2). Declarations may also be made after the holding by ACCC of a public inquiry and the publication of a report: see s152AL(3). However, the relevant service must be an “eligible service”, a term that is defined by s152AL(1) as:
“…
(a)a listed carriage service (within the meaning of the Telecommunications Act 1997); or
(b)a service that facilitates the supply of a listed carriage service (within the meaning of that Act);
where the service is supplied, or is capable of being supplied, by a carrier or a carriage service provider (whether to itself or to other persons).”
Section 152AL(3) also requires that ACCC be “satisfied that the making of the declaration will promote the long-term interests of end-users of carriage services or of services provided by means of carriage services”. As will appear, ACCC expressed itself as so satisfied in relation to the subject 1999 declaration.
A declaration under s152AL has effect (s152AL(4)) and is to be published in the Gazette (s152AL(5)). If a declaration is made, the access provider must, upon request, make access available to service providers in accordance with obligations imposed by s152AR, as set out below.
Section 152AM deals with inquiries about proposals to declare services. As no complaint is made about the inquiry held in this case, I need not set out its terms. Section 152AN permits ACCC to combine two or more public inquiries regarding the declaration of a service.
Section 152AO permits variation or revocation of declarations. However, except in the case of a minor variation, this may only be done after ACCC has held a public inquiry about the proposed variation or revocation.
Division 3 stipulates the standard access obligations imposed on access providers. It commences with s152AR. As this section is at the heart of several submissions in these proceedings I will set it out in full:
“(1) This section sets out the ‘standard access obligations’.
(2)For the purposes of this section, if a carrier or a carriage service provider supplies declared services, whether to itself or to other persons:
(a)the carrier or provider is an ‘access provider’; and
(b)the declared services are ‘active declared services’.
(3)An access provider must, if requested to do so by a service provider:
(a)supply an active declared service to the service provider in order that the service provider can provide carriage services and/or content services; and
(b)take all reasonable steps to ensure that the technical and operational quality of the active declared service supplied to the service provider is equivalent to that which the access provider provides to itself; and
(c)take all reasonable steps to ensure that the service provider receives, in relation to the active declared service supplied to the service provider, fault detection, handling and rectification of a technical and operational quality and timing that is equivalent to that which the access provider provides to itself.
(4)Paragraph (3)(a) does not impose an obligation to the extent (if any) to which the imposition of the obligation would have any of the following effects:
(a)preventing a service provider who already has access to the declared service from obtaining a sufficient amount of the service to be able to meet the service provider’s reasonably anticipated requirements, measured at the time when the request was made;
(b)preventing the access provider from obtaining a sufficient amount of the service to be able to meet the access provider’s reasonably anticipated requirements, measured at the time when the request was made;
(c)preventing a person from obtaining, by the exercise of a pre-request right, a sufficient level of access to the declared service to be able to meet the person’s actual requirements;
(d)depriving any person of a protected contractual right.
(5)If an access provider:
(a)owns or controls one or more facilities; or
(b)is a nominated carrier in relation to one or more facilities;
the access provider must, if requested to do so by a service provider:
(c)permit interconnection of those facilities with the facilities of the service provider for the purpose of enabling the service provider to be supplied with active declared services in order that the service provider can provide carriage services and/or content services; and
(d)take all reasonable steps to ensure that:
(i)the technical and operational quality and timing of the interconnection is equivalent to that which the access provider provides to itself; and
(ii)if a standard is in force under section 384 of the Telecommunications Act 1997 – the interconnection complies with the standard; and
(e)take all reasonable steps to ensure that the service provider receives, in relation to the interconnection, fault detection, handling and rectification of a technical and operational quality and timing that is equivalent to that which the access provider provides to itself.
(6)If a service provider uses active declared services supplied by an access provider in accordance with subsection (3), the access provider must, if requested to do so by the service provider, give the service provider billing information in connection with matters associated with, or incidental to, the supply of those active declared services.
(7)The billing information referred to in subsection (6) must:
(a)be given at such times or intervals as are ascertained in accordance with the regulations; and
(b)be given in a manner and form ascertained in accordance with the regulations; and
(c)set out such particulars as are ascertained in accordance with the regulations.
(8)If an access provider supplies an active declared service by means of conditional-access customer equipment, the access provider must, if requested to do so by a service provider who has made a request referred to in subsection (3), supply to the service provider any service that is necessary to enable the service provider to supply carriage services and/or content services by means of the active declared service and using the equipment.
(9)This section does not impose an obligation on an access provider if there are reasonable grounds to believe that:
(a)the access seeker would fail, to a material extent, to comply with the terms and conditions on which the access provider complies, or on which the access provider is reasonably likely to comply, with that obligation; or
(b)the access seeker would fail, in connection with that obligation, to protect:
(i)the integrity of a telecommunications network; or
(ii)the safety of individuals working on, or using services supplied by means of, a telecommunications network or a facility.
(10)Examples of grounds for believing as mentioned in paragraph (9)(a) include:
(a)evidence that the access seeker is not creditworthy; and
(b)repeated failures by the access seeker to comply with the terms and conditions on which the same or similar access has been provided (whether or not by the access provider).
(11)An obligation imposed by this section does not arise before 1 July 1997.
(12)In this section:
‘pre-request right’, in relation to a request made for the purposes of paragraph (3)(a), means a right under a contract, or under a determination (within the meaning of Division 8), that was in force at the time when the request was made.
‘protected contractual right’ means a right under a contract that was in force at the beginning of 13 September 1996.”
Sections 152AS and 152AT provide for certain exemptions from standard access obligations. Those sections are not presently relevant.
Section 152AY requires carriers and carriage service providers to comply with standard access obligations on such terms and conditions as may be agreed between the carrier or carriage service provider and the access seeker or, failing agreement, on terms and conditions specified in a relevant undertaking or as are determined by ACCC. Orders may be made in this Court to enforce the obligation: see s152BB. The obligation of compliance is also a condition of a carrier’s licence: see s152AZ.
Division 5 deals with access undertakings. An “access undertaking” is a written undertaking by a carrier or carriage service provider to ACCC under which the carrier or carriage service provider undertakes to comply with specified terms and conditions in relation to standard access obligations. This Division is not relevant to any of the present cases; no access undertaking has been given.
Division 8 concerns disputes about access. It is necessary to note only the provisions empowering ACCC to arbitrate disputes (ss152CO – 152DM) and this Court to enforce ACCC’s determinations (ss152DU – 152DZ). The matters that ACCC must take into account in determining an access dispute include:
“…
(b)the legitimate business interests of the carrier or provider, and the carrier’s or provider’s investment in facilities used to supply the declared service;
(c)the interests of all persons who have rights to use the declared service;
…” (see s152CR)
(ii) The 1997 transitional Act
The Telecommunications (Transitional Provisions and Consequential Amendments) Act1997 (No.59 of 1997) was referred to by counsel in submissions as the “Telco Act”. It is convenient to adopt that abbreviation. The Telco Act was enacted at about the same time as the Telecommunications Act1997 (No.47 of 1997) and the Trade Practices Amendment (Telecommunications) Act (No. 58 of 1997) which inserted Part XIC into the Trade Practices Act.
As its name suggests, the Telco Act was concerned with transitional matters. One of these matters was the specification of eligible services covered by access agreements registered under the earlier legislation, the Telecommunications Act 1991. However, the opportunity was taken to bring Part XIC of the Trade Practices Act into immediate service, without waiting for either a request by the Telecommunication Access Forum (s152AL(2)) or a public inquiry and report (s152AL(3)). Section 39 of the Telco Act relevantly provided:
“(1)As soon as practicable after this section commences, but, in any event, before 1 July 1997, the ACCC must prepare a written statement specifying each eligible service that was covered by an access agreement registered under section 144 of the Telecommunications Act 1991 as at the beginning of 13 September 1996.
…
(5)The ACCC must also specify in the statement an eligible service that is:
(a)necessary for the purposes of enabling the supply of a broadcasting service by means of line links that deliver signals to end-users; and
(b)of a kind that was used for those purposes on 13 September 1996.
…
(7)The ACCC must consult AUSTEL about the preparation or variation of the statement.
(8)The ACCC must not prepare or vary the statement unless the ACCC has first:
(a)published a draft of the statement or variation and invited people to make submissions to the ACCC on the draft; and
(b)considered any submissions that were received within the time limit specified by the ACCC when it published the draft.
(9)A copy of the statement, and of any variation of the statement, is to be published in the Gazette.
(10)Part XIC of the Trade Practices Act 1974 has effect, in relation to an eligible service specified in the statement, as if the ACCC had:
(a)made an instrument under subsection 152AL(3) of the Act declaring the service to be a declared service; and
(b)complied with the requirements set out in subsection 152AL(3) of that Act in relation to the instrument.
(11)This section does not prevent the instrument referred to in paragraph (10)(a) from being varied or revoked by the ACCC in accordance with section 152AO of the Trade Practices Act 1974.
…
(15)In this section:
ACCC means the Australian Competition and Consumer Commission.
…AUSTEL means the Australian Telecommunications Authority.
broadcasting service has the same meaning as in the Broadcasting Services Act 1992.
eligible service has the same meaning as in section 152AL of the Trade Practices Act 1974.
line link has the same meaning as in the Telecommunications Act 1997.”
The 1997 deeming statement
(i)The facts
Section 39(1) of the Telco Act commenced to operate on 3 May 1997, three days after the commencement of Part XIC of the Trade Practices Act. It required ACCC to make a written statement within less than two months, before 1 July 1997. On 30 June 1997, in purported compliance with this requirement, ACCC published a statement that ran to a total of 80 pages, including a two page summary and two Attachments.
In the Introduction (chapter 1 of the statement) ACCC explained the situation:
“Access obligations in relation to a particular service are established by the declaration of that service by the Commission. Transitional arrangements provide for an initial list of declared services. In particular, section 39 of the Telecommunications (Transitional Provisions and Consequential Amendments) Act (the Transitional Act) requires the Commission to prepare a statement, in consultation with AUSTEL, deeming certain services as declared services with effect from 1 July 1997.
The deeming process is intended to achieve a smooth introduction of the new telecommunications access regime by essentially retaining existing access rights for carriers, extending those rights to existing service providers and new entrants and providing access to the carriage of broadcasting services over cable networks. On an ongoing basis, declarations may take place on the recommendation of the Telecommunications Access Forum (TAF) or after a public inquiry by the Commission.
Carriage services and services that facilitate the supply of carriage services will be eligible for declaration under the regime. …”
In chapter 2 of the statement, ACCC set out its understanding of the rationale of legislation requiring access:
“The primary rationale underlying the telecommunications access regime is that the interests of end-users of telecommunications services can be promoted through the introduction of effective competition into potentially competitive markets which require the services of certain ‘bottleneck’ infrastructure. In particular, certain network elements may exhibit natural monopoly characteristics such that a single network element can produce all relevant market output at a lower cost than two or more elements. Typically, this will reflect economies of scale and scope in production.
In the absence of an access regime, the owners of such natural monopoly network elements may be in a position to inhibit or distort competition in markets which require the use of the bottleneck services. For instance, the owner of a local CAN [ie customer access network] may be able to obstruct competition in the market for long-distance telephone services through denying or restricting access to the local network. The incentive to try to limit competition in the related market may be present where the owner of the bottleneck facility has a commercial arm in the related market.
The access regime establishes rights for service providers to negotiate access to bottleneck services on reasonable terms and conditions. This is designed to create greater competition in the markets which rely on the bottleneck services, and thereby promote more efficient production and lower prices for consumers.” (footnotes omitted)
Chapter 3 of the statement deals with the process of, and framework for, the consideration of relevant issues. The chapter includes a comment pertinent to issues argued in these proceedings:
“The types of services that are eligible for declaration under the telecommunications access regime are:
·carriage services supplied between two or more points, at least one of which is in Australia; or
·services that facilitate the supply of such carriage services;
where the service is supplied, or is capable of being supplied, by a carrier or a carriage service provider.
Consistent with Part IIIA, the telecommunications access regime provides for the declaration of a service provided by means of an infrastructure facility rather than declaration of the infrastructure itself. This recognises that a facility may be used to provide multiple services, only some of which it might be in the interests of end-users to declare.
The declaration of services that facilitate the supply of carriage services is intended to allow for access obligations to be attached to blocks of functionality, or other inputs, which, while not carriage services themselves, may be used to produce a carriage service. In this regard, it will facilitate the efficient unbundling of services.” (footnotes omitted)
Chapter 4 of the statement relates to services covered by existing access agreements and chapter 5 with mobile phone services. They are not here relevant. However, it is desirable to set out the whole of chapter 6 of the statement, dealing with broadcasting carriage services:
“Section 39(5) of the Transitional Act provides that the ACCC must specify in its deeming statement eligible services necessary for the supply of broadcasting services by means of line (as distinct from air) links and that was of a kind used for supplying broadcasting services on 13 September 1996.
The Commission is not required to take account of the LTIE [ie long-term interests of end-users] criteria when deciding whether to deem services under s.39(5) (although the criteria would be relevant should a carrier seek an exemption from the standard access obligations which apply to active declared services). Consequently, the key issue is how broadcasting carriage and related support services should be specified in the deeming statement.
The Commission understands that that [sic] such a carriage service would include carriage services for the transmission of pay TV over the Telstra and Optus cable networks, as well as Pay TV carriage services for AUSTAR’s network in Darwin and Northgate’s network in Ballarat.
The TAF has proposed a technical specification of this service which has been revised from a previous version included in the Commission’s draft Statement of 2 June. The TAF’s revisions reflect the concerns of the TAF to specify the service so that it is only applicable to broadcast services provided by cable networks (as opposed to other type of networks, such as satellite networks) consistent with s.39(5).
Bundled nature of service
The Commission has also received comments from a potential access seeker to this service who is concerned at the bundled nature of this product. Under the TAF’s definition, an access seeker would be required to acquire not just the distribution or carriage function but also the network management access function, the conditional access function and servicing function. It can be expected that where technically feasible, such functions may be able to be carried out by the access seeker directly. As an example, an access seeker may choose to supply their own subscriber authorisation services. As technologies and markets develop, it can be anticipated that this will be a feature of the provision of such services and will provide access seekers with greater access to, and control over, their customers.
On the present state of technology, particularly the current use of analogue-based delivery systems, the Commission understands that it may be prohibitively expensive for the access seeker to provide these functions itself. It should be noted that the service description in Attachment B is only applicable to current analogue cable technology.
In this context, it is relevant that the standard access obligations in section 152AR(8) of Part XIC of the TPA, which apply upon deeming or declaration of a service, allow an access seeker, if they choose, to request the supply of conditional access services (including the use of conditional access customer equipment) where these services are already being used by the access provider. Consistent with this optional nature of obtaining such a service, the description of the broadcasting carriage service should ensure that access seekers would only be obliged to acquire those service elements which they require. For example, it is doubtful that a free to air broadcaster would necessarily require the use of conditional access systems or equipment in providing their service on cable networks.
The description of the service in Attachment B has been accordingly amended from that proposed by the TAF, to ensure that it only applies to the current analogue environment, and that access seekers are not obliged to acquire service elements which they do not require as part of the provision of the service.”
The acronym “TAF” refers, of course, to the Telecommunications Access Forum constituted under s152AI of the Trade Practices Act. Membership of TAF is open to carriers and carriage service providers.
The statement concludes with a note on the operation of the new regime (chapter 7) and a summary of services which ACCC had decided to deem, or not to deem, to be declared services.
Attachment A to the statement contains technical specifications for each of the deemed services. It is not presently relevant. However, the opening words of Attachment B achieved prominence in the argument. They are:
“Broadcasting Access Service Description
The service, being an analogue service supplied by an AP, necessary for the purposes of enabling the supply by an AS of a broadcasting service by means of line links that deliver signals to end-users, and of a kind that was used for those purposes on 13 September 1996, is an access service which provides a basic carriage and distribution access function and which may also include, if requested, one or more of the following elements:
(a)network management access function;
(b)conditional access function; and
(c)subscriber premises servicing function.”
The letters “AP” are, of course, an abbreviation of access provider. “AS” means access seeker.
Attachment B goes on to describe in some detail the elements in the “distribution access function”, “network management access function”, “conditional access function” and “subscriber premises servicing function”. Those descriptions correspond with the characteristics of the current FOXTEL system.
The Summary of the deeming statement reads as follows:
“Section 39 of the Telecommunications (Transitional Provisions and Consequential Amendments) Act 1997 (the Transitional Act) provides for the Australian Competition and Consumer Commission to prepare a statement, in consultation with AUSTEL, specifying certain services to be deemed as declared services. The services which are eligible to be deemed under s.39 include certain services covered by registered access agreements between the three existing carriers and certain broadcasting carriage services.
This statement is the Commission’s written statement under Section 39, and fulfils the Commission’s obligation under s.39(1) and s.39(5) of the Transitional Act.
On or after 1 July 1997, carriers and service providers will be able to be provided with the deemed services and specified ancillary services, on request, from any carrier or carriage service provider supplying the services. The terms and conditions of access may be determined by commercial negotiation, an undertaking submitted by the access provider and which has been accepted by the Commission, or, in the event that the parties are unable to agree, by arbitration by the Commission.
The Commission in preparing this statement, published a draft and invited submissions in accordance with s.39(8). The Commission released a draft statement on 4 June 1997. Parties were provided with fourteen days to respond. Within that time the Commission met with many interested parties and received 22 written submissions. The Commission gave due consideration to all representations and submissions in relation to this matter in preparing the statement.
Table A specifies the services deemed as declared services under s.39. The approach employed by the Commission in determining which eligible services to deem, on the basis of the legislative criteria relating to the promotion of the long-term interests of end-users, is outlined in the statement. Attachments A and B contain more detailed service descriptions of the services specified in the statement. The Commission has adopted service descriptions developed by the TAF for those deemed services where they have been available and are considered appropriate. The service descriptions in the attachments outline the elements and features of the service and provide guidance to access providers and access seekers in negotiating the terms and conditions under which the service will be provided.
The Commission raised in its draft deeming statement its interest in ensuring that additional eligible services, for which early access is considered important, are considered for declaration either by the TAF or the Commission under s.152AL of the Trade Practices Act. On the basis of comments received, the Commission intends to announce a public inquiry into the declaration of additional services soon after the commencement of the new regime.”
Table A, referred to in the fifth paragraph of the summary, includes eleven items. The last of them is expressed in the following terms:
“(xi) Broadcasting access service
An analogue service necessary for the purposes of enabling the supply of a broadcasting service by means of line links that deliver signals to end-users, and of a kind that was used for those purposes on 13 September 1996. This is an access service which provides a basic carriage and distribution access function together with other functions as requested.” [Original emphasis]
The deeming statement is dated 30 June 1997 but nothing was gazetted, in purported compliance with s39(9) of the Telco Act, until 9 July 1997. The Gazette of that day included the following notice:
“Deeming of Telecommunications Services:
A statement pursuant to section 39 of the Telecommunications (Transitional Provisions and Consequential Amendments) Act 1997
Following is a copy of the summary of the Deeming of Telecommunications Services statement released by the Australian Competition and Consumer Commission on 30 June 1997. Copies of the full statement are available from the ACCC’s Internet website 39 of the Telecommunications (Transitional Provisions and Consequential Amendment) Act 1997 (the Transitional Act) provides for the Australian Competition and Consumer Commission to prepare a statement, in consultation with AUSTEL, specifying certain services to be deemed as declared services. The services which are eligible to be deemed under s.39 include certain services covered by registered access agreements between the three existing carriers and certain broadcasting carriage services.
This statement is the Commission’s written statement under Section 39, and fulfils the Commission’s obligation under s.39(1) and s.39(5) of the Transitional Act. …”
The notice then reproduced the whole of the Summary of the statement, set out in para 58 above, including Table A, mentioned in para 59.
(ii)The bases of challenge
Counsel for Foxtel Management and Sky Cable (collectively “Foxtel”), Dr G Flick SC and Mr R Lancaster, and counsel for the three Telstra companies (“Telstra”) that are cross claimants in proceeding N1095 of 1999 (Mr M Pembroke SC and Dr J Griffiths), submit the 1997 deeming statement is invalid. They put this submission on a number of bases.
Counsel for Foxtel argue four points:
(a)no copy of the statement was published in the Gazette, as required by s39(9) of the Telco Act;
(b) the service specified in the deeming statement is uncertain;
(c)if the service is certain, because regard may be had to Attachment B of the statement, it is not an “eligible service” within the meaning of s39(15) of the Telco Act;
(d)the services specified in Attachment B are not “necessary” for the purpose of enabling the supply of a broadcasting service.
Counsel say its clients’ success on any one of the first three points would lead to a conclusion that the deeming statement is void; the result of upholding point (d) would be that the statement went beyond the Commission’s power and is, for that reason, void.
Counsel for Telstra put submissions supporting Foxtel’s points (b), (c) and (d). They also put three additional arguments:
(e) ACCC failed to “specify” a broadcasting service;
(f)the deeming statement does not specify a single broadcasting service; and
(g)the broadcasting access service that the ACCC purported to specify was not “of a kind” used on 13 September 1996.
Point (a) stands apart from the others; it does not depend upon the content of any deeming statement but merely upon the consequences of non-compliance with s39(5) of the Telco Act. The remaining six points arise out of the wording of this particular deeming statement. They raise a question as to the extent (if any) to which it is legitimate to have regard to Attachment B. There is overlap between the six points, so I will consider them together. I will do that in a way that will not attempt to follow the order of the six points. Moreover, counsels’ written submissions, though helpful, are voluminous. This is partly because they address permutations that might arise, depending on my view about anterior points. I have carefully read all the submissions, but I will not deal with every proposition they contain. I will confine myself to the points that need to be decided, having regard to my views about anterior points.
(iii)Delay in challenge
I should say at this stage that counsel for ACCC (Mr A Robertson SC, Mr N Williams and Ms M Painter) submit I ought not to consider the arguments about invalidity raised by Foxtel and Telstra, the reason being their delay in challenging the validity of the deeming statement. They point out that the relief sought by Foxtel Management in proceeding N1150 of 1999 is discretionary, as is the relief sought by the both Foxtel and Telstra in their cross-claims to proceeding N1095 of 1999.
There is evidence that, in September 1998, both Telstra Multimedia and Foxtel Management suggested to an officer of ACCC that ACCC exceeded its powers when it made the deeming statement. By letter dated 2 October 1998, Foxtel Management articulated arguments for this view. By letter dated 3 December 1998, Telstra Multimedia wrote to ACCC expressing “concerns about the validity” of the 1997 statement. These arguments and concerns were not accepted by ACCC; nevertheless, it was not until October 1999 that any Foxtel or Telstra company instituted any proceeding challenging validity. In the meantime, both TARBS and Seven Cable had apparently acted on the basis that the statement was valid. There is substance in ACCC’s criticism of Foxtel’s and Telstra’s delay.
However, I have come to the conclusion that I ought to consider the arguments about validity raised by Telstra and Foxtel. The validity of an instrument such as the deeming statement is a question of public importance; the statement has potential ramifications for persons other than Telstra and Foxtel. Moreover, Seven Cable seeks, in proceeding N1095 of 1999, to enforce rights that are said to arise under the deeming statement. Provided they litigate their claim in a manner that will not cause unfairness to others, it should be open to persons against whom rights are asserted to argue the rights do not exist because the relevant instrument is invalid.
(iv)The effect of non-publication in the Gazette
I said that Foxtel’s first point depends on the consequences of non-compliance with s39(9) of the Telco Act because I think it is clear that ACCC did fail to comply with that subsection. Section 39(9) ordained that “a copy of the statement … is to be published in the Gazette”. However, as the opening words of the published notice make clear, what was published in the Gazette was not a copy of the whole statement – that is, all 80 pages – but only a summary of it. The Gazette summary reproduced the Summary at the beginning of the long document, including Table A.
Counsel for Foxtel make the point that s39(9) requires publication in the Gazette of a “copy of the statement”; unlike some statutory provisions, it does not simply provide for publication of a notice that a particular instrument has been made, with information as to where the instrument may be inspected. Counsel say the failure to comply strictly with s39(9) spells invalidity and cite two passages from judgments in the High Court of Australia in Watson v Lee (1979) 144 CLR 374.
The plaintiffs in Watson v Lee were charged with offences under the Banking (Foreign Exchange) Regulations. They argued that the regulations were not authorised by the Banking Act1974; furthermore they were affected by irregularities in that none of the regulations were available for purchase on the day they were published in the Gazette. Two statutory provisions were relevant to the case. First, s48(1) of the Acts Interpretation Act1901 then provided that all regulations made under an Act:
“(a) shall be notified in the Gazette;
(b)shall, subject to this section, take effect from the date of notification, or, where another date is specified in the regulations, from the date specified; and
(c)shall be laid before each House of the Parliament within fifteen sitting days of that House after the making of the regulations.”
Second, s5(3) of the Rules Publication Act 1903 provided that:
“Where any statutory rules are required by any Act to be published or notified in the Gazette, a notice in the Gazette of the rules having been made, and of the place where copies of them can be purchased, shall be sufficient compliance with that requirement.”
In Watson v Lee the regulations that created the offences with which the plaintiffs were charged were not published in the Gazette. The making of the regulations was notified in the Gazette, but there was a question as to whether they were then available for purchase.
The High Court unanimously held the regulations were operative at all material times. Barwick CJ pointed out that regulations are made when signed by the Governor-General; however, they do not become operative until notified in the Gazette. That is the effect of s48(1) of the Acts Interpretation Act, a provision that “really requires the terms of the regulation to be published in the Gazette”: see 379. However, s5(3) of the Rules Publication Act provides “an alternative method of notification”: see 380. This method requires copies of the regulation to be available at the notified place. His Honour was of the opinion that, if it were established that the regulation was never made available at the notified place, it would be inoperative; however, as the factual position was left unclear, the presumption of regularity of official acts applied.
It will be noted that the Chief Justice’s analysis depended entirely on the application of two statutory provisions, s48(1) of the Acts Interpretation Act and s5(3) of the Rules Publication Act, neither of which is relevant to the deeming statement under consideration in this case. Counsel for Foxtel quoted the final paragraph on 379, but that is plainly an exposition of the requirements of s48(1) of the Acts Interpretation Act; it is not a general pronouncement about the consequences of failure to publish a copy of an instrument in the Gazette.
The other members of the Court (Gibbs, Stephen, Mason and Aickin JJ) dealt with the issue in terms of the same two statutory provisions. None of them made a general pronouncement. The passage in the judgment of Stephen J at 395-396, cited by counsel, is clearly directed to the requirements of s48(1).
Counsel for Foxtel also referred to McDevitt v McArthur (1919) 15 Tas LR 6 and Flinn v James McEwan & Co Pty Ltd [1991] 2 VR 434. However, neither of these decisions propounds a general principle.
McDevitt v McArthur was a decision of the Full Court of the Supreme Court of Tasmania concerning a prosecution for breach of a by-law. Apparently, the by-law had not been published in intelligible form. Although he did not set out its terms, Nicholls CJ (at 7) said “(t)he statute provides that, before by-laws shall bind the people, they shall be published”. If that was so, it is unsurprising the Court granted prohibition.
Flinn was a decision of the Court of Appeal of the Supreme Court of Victoria. The case arose out of a defective proclamation notifying the commencement of operation of a statute. The notice in the Government Gazette omitted any reference to the Governor or the official seal. Section 11(2) of the Interpretation of Legislation Act 1984 provided that, where an Act provides that it shall come into operation “on a day to be fixed by proclamation of the Governor in Council published in the Government Gazette, the publication of the proclamation in the Government Gazette shall be a condition precedent to the coming into operation of the Act”. As the proclamation was obviously defective, it is once again unsurprising that the Court held the Act had not commenced to operate.
Counsel for ACCC point out that s39 of the Telco Act does not make gazettal of the ACCC statement a condition precedent to its operation. On the contrary, they suggest, Parliament’s intention was that the statement would take effect immediately it was made.
I think this suggestion is correct. Subsection (1) of s39 requires ACCC, as soon as practicable but, in any event, before 1 July 1997, to prepare a written statement specifying each eligible service that was covered by an access agreement registered under the 1991 Act. Subsection (5) requires ACCC, in that statement, to specify an eligible service meeting the description of paras (a) and (b). Subsections (7) and (8) specify steps to be taken in the course of preparation of the statement. No doubt they are conditions precedent to a valid statement. But subs (9) specifies a step that can be taken only after the statement is made. And subs (10) provides for the immediate operation of a statement: Part XIC “has effect, in relation to an eligible service specified in the statement …”
It seems to me ACCC created a problem for itself by describing the whole of its 80 page document as “A statement pursuant to section 39” of the Telco Act. Once it had done that, it was under an obligation to publish the whole document in the Gazette. That was obviously an inconvenient course. Sensibly, ACCC thought it would be sufficient to publish a summary that briefly explained the position, listed the selected eligible services in Table A and informed readers as to the availability of the full document on ACCC’s Internet website. That course could have been taken, consistently with s39(9), if ACCC had made its Summary the statement pursuant to s39 and provided the longer document only by way of reasons for determination.
ACCC did not take this course. It chose a course that involved an omission to comply with s39(9). However, for the reasons I have expressed, that omission does not invalidate the statement. Point (a) must be rejected.
(v)The legitimacy of reference to Attachment B
Counsel for Foxtel argue that s39(1) and (5) of the Telco Act require certainty. They say this is generally a requirement of exercises of statutory power. They cite the observations of Kitto J in Television Corporation Limited v The Commonwealth of Australia (1963) 109 CLR 59 at 70-71. Counsel note the use of the word “specify” in s39(5) and the requirement of s39(9) for gazettal of the statement. They say “(t)he only service which has been specified is the service referred to in paragraph (xi) of Table A, since that is the service specification contained in the Gazette”. It is irrelevant, they say, that ACCC has issued a more detailed service description in Attachment B.
The response to this submission offered by counsel for ACCC is that:
“(a)the duty imposed upon it by s.39(5) of the Transitional Act [i.e. the Telco Act] required no more than the inclusion in the statement of an eligible service described in the terms of s.39(5)(a) and (b);
(b)the description contained in Table A should, on ordinary principles of construction, be read together with Attachment B to the report of which it formed part, and so read, is neither uncertain nor ambiguous;
(c)Even if the inclusion of the additional elements creates uncertainty, or is erroneous for any other reason, those elements are severable, and the remaining description is valid.”
I accept Foxtel’s argument about the need for certainty. But I do not accept that the question whether the statement was uncertain must be resolved by reference only to Table A. Table A is part of a summary that refers to Attachment B, as one of two attachments that “contain more detailed service descriptions of the services specified in this statement”. A reader interested in better understanding the descriptions in Table A is directed to Attachment B.
Error of law enlivens the jurisdiction of the Court to quash or set aside a decision: see Administrative Decisions (Judicial Review) Act, s5(1)(f). Foxtel argues ACCC made two errors of law in arriving at its decision:
“(a)it applied the ‘with and without test’ erroneously or inconsistently when considering the long-term interests of end-users;
(b)it misconstrued the phrase ‘long-term interests of end-users’ or misconstrued the manner in which the ACCC could be ‘satisfied’ that declaration would promote the ‘long-term interests of end-users.” (footnotes omitted)
Counsel say, in relation to the first matter, that ACCC’s application of the “with and without test” is legally flawed. The argument proceeds:
“If the 1997 Deeming Statement is valid, there is simply no basis upon which the ‘with and without test’ can be applied – the environment within which the 1999 Declaration will operate is substantially the same. It is only if the 1997 Deeming Statement is invalid that there exists a basis for comparison. Moreover, if the Deeming Statement is valid, the Declaration could not have any effect on competition since it does not materially change the environment in which competition takes place. In those circumstances, it would not be open to the ACCC to be satisfied of the matters in s152AL(3)(d).
Although the ACCC asserts its belief as to the validity of the Deeming Statement, it also assumes elsewhere in its Report that the Deeming Statement is invalid. Thus:
(a)when assessing the potential for the 1999 Declaration to discourage efficient investment, the ACCC assumes the validity of the 1997 Deeming Statement when it notes that ‘a similar service is already declared’ and ‘the effect of … declaration … should not be material’;
but
(b)when assessing the benefits of declaring the analogue cable carriage service, the ACCC assumes the invalidity of the 1997 Statement when it notes that ‘competition will be promoted to a noticeable extent …’
The consequence is that the ACCC has applied its own methodology inconsistently and the 1999 Declaration is, accordingly, not authorised by the TPA.” (footnotes omitted)
This argument misunderstands ACCC’s reasoning. It is true that ACCC asserted its belief in the validity of the 1997 deeming statement; but it was faced with the situation that concerns had been expressed about validity. At an early point in its report (para 2.3), the Commission explained that, although it considered the existing declaration to be valid, “in order to provide certainty” it had initiated inquiries into whether to declare “analogue-specific subscription television broadband carriage services” and “technology-neutral subscription television broadband carriage services”. The report was the culmination of the first of those inquiries. In para 2.3.1 ACCC said:
“The Commission considers that the greater certainty provided by the proposed declaration would promote competition beyond the level that could be expected under the existing declaration. Although the Commission considers the existing declaration to be valid, the Commission considers that access seekers may be reluctant to seek to enforce their rights under it while there is uncertainty in the industry as to its validity. The Commission considers it unlikely that the advantages which might otherwise arise from increased competition would be realised in these circumstances.”
These passages make apparent that ACCC believed that, even though the 1997 deeming statement was valid, there was a case for making a new declaration, in order to put to rest the concerns that had been expressed. This itself would stimulate competition. Given the financial commitment any access seeker would need to make, that was a readily understandable position.
The statement quoted in para (a) of Foxtel’s submission was made by ACCC in the context of discussing whether a declaration would discourage investment on infrastructure. ACCC said in its report:
“The Commission believes that the impact of declaration on the current environment should be considered in forming a view on this issue. Since a similar service is already declared (pursuant to the deeming statement), the effect of the analogue-specific declaration on the decision to invest should not be material. The deeming statement was issued on 30 June 1997, effectively declaring pay television services. At that time C&W Optus and Telstra were still in the process of building their networks and did not cease further buildout until well after this date.
Similarly, new infrastructure providers such as Austar, NorthPower, and ACTEW either continued their buildout or continued their plans to develop a broadband network. If declaration were a significant deterrent to infrastructure buildout, it would have been expected that no development or further expansion would have taken place after the deeming statement was issued.
The Commission would be concerned should declaration lead to Telstra and/or C&W Optus not expanding their networks but is of the view that such an outcome is not made more likely by declaration.” (footnotes omitted)
By way of comment on a factual matter, it may be that ACCC put too much weight on the circumstance that infrastructure providers continued their buildout, or their plans to develop a broadband network, after the deeming statement was made. It is possible, although perhaps unlikely, that the infrastructure providers all thought the deeming statement was invalid, and therefore were content to ignore it. I do not know whether ACCC had information negativing that possibility. If not, it would have been advisable to take the possibility into account. But omission to do so would not have been an error of law; it would merely make questionable the opinion expressed in the last sentence of the passage quoted in para 204.
Counsel’s second “error of law” point arises out of the requirement of s152AL(3)(d) that ACCC be satisfied, before making a declaration, that it “will promote the long-term interests of end-users of carriage services or of services provided by means of carriage services”. Counsel say that, in reaching its state of satisfaction, “ACCC failed to address or reach any requisite state of ‘satisfaction’ that elements of the service it declared were ‘bottleneck services’”. It did not need to do this.
(ix)No evidence
Counsel for Foxtel say “ACCC made findings of fact for which there was no evidence and which did not exist”. In putting the matter in that way, counsel undoubtedly had in mind the terms of the Administrative Decisions (Judicial Review) Act. Section 5(1)(h) makes it a ground of review “that there was no evidence or other material to justify the making of the decision”. Section 5(3) explains what that entails:
“(3)The ground specified in paragraph (1)(h) shall not be taken to be made out unless –
(a)the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or
(b)the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist.”
As I understand their submission, counsel for Foxtel place no reliance on para (a); they rely on para (b).
The relevant findings of fact fall into two categories:
“(a) facts relevant to the ACCC’s determination as to market; and
(b) facts relevant to the ACCC’s determination as to niche programming.”
In support of para (a), counsel set out 12 pages of submissions in favour of the proposition that ACCC should have defined the market as including free-to-air television. The submissions reproduce Professor Williams’ argument to that effect.
These submissions are misconceived. As I have already stated, this is not a case in which this Court has to form a view about the proper delineation of a market. The facts were for ACCC to determine, including the factual questions of the identity and extent of any relevant market. For that reason, I rejected Professor Williams’ evidence. For the same reason, I decline to consider Foxtel’s submissions about market definition.
In any event, as I pointed out in paras 173 to 174 above, ACCC did not base its decision to make a declaration on its view that the relevant market did not include free-to-air television.
In relation to the findings of fact in category (b), I agree that ACCC based its decision on its view about niche programming; but I do not think Foxtel can make out a case falling within s5(3) of the Administrative Decisions (Judicial Review) Act. In their written submissions, counsel for Foxtel complain that “ACCC failed to provide evidence” to support their assertions that a declaration would be likely to promote competition to a material degree. They go on to identify, and criticise, the evidence placed before ACCC about niche programming opportunities. In their submissions, counsel concede that “the extent to which competition will be promoted (by a declaration) is largely a matter of judgement”. This concession demonstrates their submission is really a quarrel with the ACCC’s judgment about the matter. However, it was for ACCC to make the judgment, not Foxtel or this Court. Even if it could be said that the material before ACCC relating to niche programming opportunities was unpersuasive (and I would not myself say that), that would not establish the negative proposition required by s5(3) of the Administrative Decisions (Judicial Review) Act. For that subsection to be satisfied, Foxtel would have to establish, by evidence in this Court, that a declaration would not be likely to promote competition in respect of niche programming to a material degree. This is an onerous requirement. It was deliberately made that way: see Television Capricornia Pty Ltd v Australian Broadcasting Tribunal (1986) 13 FCR 511 at 519-520 and Curragh Queensland Mining Limited v Daniel (1992) 34 FCR 212 at 223-224. As the history set out in those decisions demonstrates, Parliament adopted the policy position that, where the facts were obscure (or unknowable), the statutory decision-maker’s view about them should prevail.
In the present case, the critical factual matter is unknowable; what will be the result of a declaration, in terms of niche programming competition, can be no more than an educated guess. In the nature of things, it is virtually impossible to demonstrate that ACCC’s view is incorrect. And that is what Foxtel needs to establish in order to make out this ground of challenge.
(x)Failure to make inquiries
This ground, although raised, is scarcely argued by Foxtel. Foxtel’s counsel content themselves by alluding to what I said about the duty to make inquiries in Prasad v Minister for Immigration and Ethnic Affairs (1985) 6 FCR 155 at 169-170. They might have added a reference to Luu v Renevier (1989) 91 ALR 39, where a Full Court (at 49) endorsed my comment in Prasad and noted its consistency with the approach of Mason CJ in Chan v Minister for Immigration and Ethnic Affairs (1989) 169 CLR 379. However, counsel seem to overlook the limitations I indicated in Prasad. At 170 I said:
“It is no part of the duty of the decision-maker to make the applicant’s case for him. It is not enough that the court find that the sounder course would have been to make inquiries. But, in a case where it is obvious that material is readily available which is centrally relevant to the decision to be made, it seems to me that to proceed to a decision without making any attempt to obtain that information may properly be described as an exercise of the decision-making power in a manner so unreasonable that no reasonable person would have so exercised it.”
It will be a relatively rare case in which a statutory decision is vitiated because of the decision-maker’s failure to make inquiries. It will need to be apparent that relevant material was readily available to the decision-maker, but ignored.
In the present case no attempt has been made to identify material that was available to ACCC but ignored. This ground of attack fails.
(xi)Unreasonableness
The Administrative Decisions (Judicial Review) Act includes, as a ground of review, what lawyers call Wednesbury unreasonableness; the name coming from the decision of the English Court of Appeal in Associated Provincial Picture Houses v Wednesbury Corporation [1948] 1 KB 223. The formulation of the ground in the Administrative Decisions (Judicial Review) Act is “an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power”: see s5(2)(g) of the Act. It is a ground frequently asserted but rarely established.
In Taveli v Minister for Immigration, Local Government and Ethnic Affairs (1989) 86 ALR 435, I observed at 453 that “(p)robably the ground has its most frequent application in cases in which the challenger can demonstrate an illogicality in, or misapplication of, the reasoning adopted by the decision-maker; so that the final result is perverse, by the decision-maker’s own criteria”. I cited as examples Parramatta City Council v Pestell (1972) 128 CLR 305 and Prasad and went on:
“There may be cases – although I think that they are likely to be rare – in which all of the factors germane to a particular decision point in one direction. If such a case arose, it would seem proper to brand as unreasonable a decision to the contrary effect. But ordinarily there will be factors pointing in each direction. Where that is the situation, the weight of those factors is a matter for evaluation by the decision-maker. In such a case, even though a particular judge might feel that the preferable decision would have been otherwise, that feeling would not be sufficient to justify the condemnation of the decision as unreasonable, in the relevant sense. As Menzies J said in Pestell (at 323):
‘There is, however, a world of difference between justifiable opinion and sound opinion. The former is one open to a reasonable man; the latter is one that is not merely defensible – it is right. The validity of a local rule does not depend upon the soundness of a council’s opinion; it is sufficient if the opinion expressed is one reasonably open to a council. Whether it is sound or not is not a question for decision by a court.’”
These words are apposite to the present case. The submission of counsel for Foxtel is that ACCC failed “to give adequate weight” to matters set out in Foxtel’s submissions to it. These matters include delineation of the relevant market but extend to other subjects as well; notably the extent of existing, and likely future, competition amongst subscription television program providers. I understand the points made by Foxtel but I have not attempted to form a view about their substance; this is not a matter for the Court. That there was material pointing the other way is conceded by counsel’s reference to weight. The concession is rightly made. Submissions from several would-be “niche” providers supported ACCC’s conclusion. The submission of unreasonableness must fail.
(xii)Conclusion on 1999 declaration
None of the grounds of challenge to the validity of the 1999 declaration is made out. The claim made by Foxtel for an order quashing or setting aside the declaration must be refused. Instead, it is appropriate for me to make a declaratory order as to the validity of ACCC’s declaration. I will do so.
The declaratory relief sought by Foxtel Management in N1088 of 1999 concerns that company’s status as a “carrier”, “carriage service provider” or “access provider”, within the meaning of s152AR(2). That issue is now committed to proceeding N217 of 2000.
Is Foxtel a “carriage service provider”
(i)Background
In matter N217 of 2000 Foxtel seeks various declarations, all of which depend upon the proposition that it is not a “carrier” or “carriage service provider” which supplies declared services, with the meaning of s152AR(2) of the Trade Practices Act. If it does not have that status, it is also not an “access provider” within the meaning of s152AR, and is not affected by either of the subject ACCC instruments.
For the purposes of Part XIC of the Trade Practices Act, “carrier” has the same meaning as in the Telecommunications Act: see the definition in s152AC of the Trade Practices Act. In the Telecommunications Act, the word “carrier” means the holder of a carrier licence: see s7 of the Telecommunications Act. It is common ground that Foxtel is not the holder of a carrier licence. Therefore, it is not a “carrier” for the purpose of s152AR of the Trade Practices Act.
However, Seven Cable and TARBS argue Foxtel is a “carriage service provider”, within the meaning of s152AR, and therefore an “access provider” of the services specified in the 1997 deeming statement and the service declared in 1999. Foxtel disputes this.
For the purposes of Part XIC of the Trade Practices Act, the term “carriage service provider” has the meaning ascribed to it in the Telecommunications Act: see s152AC. That is the meaning set out in s87 of the latter Act: see s7 of the Telecommunications Act.
During argument of the issues in N217 of 2000, Foxtel was represented by Mr A J Meagher SC and Mr M Leeming, Seven Cable by Mr C Moore and TARBS by Mr N A Cotman SC. ACCC did not participate in the argument of those issues.
(ii) Section 87(1) of Telecommunications Act
Section 87(1) of the Telecommunications Act contains a definition which, according to Seven Cable and TARBS, covers Foxtel’s situation:
“(1)For the purposes of this Act, if a person supplies, or proposes to supply, a listed carriage service to the public using:
(a)a network unit owned by one or more carriers; or
(b)a network unit in relation to which a nominated carrier declaration is in force;
the person is a carriage service provider.”
Sections 89 to 96 create, or provide for the creation of, certain exclusions of s87(1). For present purposes, it is necessary to note only s93(1), as follows:
“(1) If:
(a)the sole or principal use of a carriage service is use to carry communications that are necessary or desirable for either or both of the following purposes:
(i) the supply of broadcasting services to the public;
(ii)the supply of a secondary carriage service by means of the main carrier signal of a primary broadcasting service; and
(b)those communications are neither:
(i)communications carried between the head end of a cable transmission system and the equipment used by an end-user to receive a broadcasting service; nor
(ii)communications carried from a broadcasting transmitter transmitting a signal of a broadcasting service to its intended audience;
subsections 87(1) and (2) do not apply to the carriage service.”
It is not suggested by any party that there is a nominated carrier declaration in force in relation to a network unit. Consequently para (b) of s87(1) does not apply. The issue under s87(1) is whether FOXTEL “supplies … a listed carriage service to the public using a network unit owned by one or more carriers”.
As I mentioned in para 27 above, it is common ground that the services by which the information streams generated by FOXTEL (that is, Foxtel Cable and Foxtel Management) are carried to subscribers’ television sets are a “listed carriage service”. The service is supplied to the public.
The FOXTEL service uses the broadband network unit owned by Telstra Multimedia which, it is agreed between the parties, is a holder of a carrier licence under the Telecommunications Act, and so a “carrier” within the meaning of s87(1) of that Act. However, counsel for Foxtel point out that some elements in the communication system used for the FOXTEL service are not owned by a “carrier”; they are supplied by one of the Foxtel companies. They cite the playout centre at Pyrmont and the fly cables, set top units and remote controls located in subscribers’ premises. The Pyrmont playout centre is to be disregarded for present purposes because it is upstream of the headends: see s93(1)(b)(i) of the Telecommunications Act set out in para 227.However, the fly cables and set top units are an integral part of the relevant “carriage service”; to use the words of the definition in s7 of the Telecommunications Act, a “service for carrying communications by means of guided and/or unguided electromagnetic energy”. Yet, say counsel, they are not owned by a “carrier”, but supplied by FOXTEL.
Counsel accept that, on this argument, FOXTEL is engaged in supplying a service, but they say the facilities provided by FOXTEL do not constitute a “network unit”. That term is explained in Division 2 of Part 2 of the Telecommunications Act. Relevantly, it involves either a minimum line link length or multiple line links. Nobody contends the fly cable–set top unit system in a single subscriber’s premises falls within Division 2 of Part 2 of the Telecommunications Act.
Counsel for Foxtel accept that Foxtel Cable and Foxtel Management is each a “content service provider” within the meaning of s97 of the Telecommunications Act (see para 29 above). They say that is all they are.
In their written submissions, counsel for Foxtel contend that “the Act exhibits a clear distinction between carriage services and content services, such that the two are mutually exclusive”. They concede that one person may be both a carriage service provider and a content service provider. But they say:
“That is not the case in these proceedings. There is only one activity undertaken by FOXTEL: the supply of pay television services by use of a carriage service owned by Telstra Multimedia. The real question is whether the pay television service provided by FOXTEL may be characterised both as a listed carriage service and as a content service.”
Responding to opening submissions made by counsel for Seven Cable, counsel for Foxtel warn against confusing communications and communications services. They say:
“An end user only receives a carriage service if he or she receives a service for conveying communications by means of electromagnetic energy. FOXTEL’s customers do not receive any service for conveying communications. They merely receive the communications themselves. A person who receives a letter in the post does not receive a postal communications service. The person receives what has been conveyed by the postal communications service.
It is true, of course, that pursuant to the Broadband Co-operation Agreement, Telstra Multimedia supplies the Broadband System Service in order that FOXTEL may supply content to its customers. That is undoubtedly the supply to FOXTEL of a carriage service. But that merely confirms (what is not in dispute) that Telstra Multimedia is a carrier service provider as well as a carrier.
If Seven’s submission were correct, then the mere fact that an end-user received any form of communication would mean that a carriage service was being provided to the end-user. That would entirely elide the distinction between carriage services and content services, a construction which cannot have been intended by Parliament having regard to the structure of the legislative regime.” [Original emphasis]
Counsel go on:
“… Seven makes the further submission that:
‘both Foxtel Cable and Foxtel Management agree to provide a cable television service. This includes, as a necessary element, a service of carrying the channels to the end-user. Foxtel may outsource this carriage function to Telstra Multimedia, but this is irrelevant to the consideration of whether Foxtel is supplying a carriage service to the public.’
That submission repeats the same error. FOXTEL has agreed to provide to the public a cable television service, ie content. It is a content service provider. FOXTEL has not agreed to provide a communications service to the public, and it has not outsourced this service. It is not a carriage service provider. If FOXTEL’s agreement to supply television channels to the public rendered it a carriage service provider, then every content service provider would, on Seven’s argument, also be a carriage service provider.”
Counsel for Seven Cable responds to this aspect of Foxtel’s argument by saying its effect would be that nobody provided to the public the listed carriage service constituted by FOXTEL’s programs. Yet, says counsel:
“The relevant end-users are having conveyed to them a set of pay television channels, being visual images (communications) supplied from point to multipoint by guided electromagnetic energy. They are therefore receiving a carriage service. The carriage service is supplied between two points in Australia and is therefore a listed carriage service.”
Counsel for Seven Cable referred to s88 of the Telecommunications Act. That section identifies the circumstances under which a service is “supplied to the public”. It is a feature of all three situations postulated in s88 that there is supply to at least one “end-user” outside the immediate circle of the supplier: see subss 88(2)(3) and (4). Having regard to this section, says counsel, it cannot be postulated that Telstra Multimedia supplies the FOXTEL service to the public; Telstra Multimedia only takes the signal to wall plates at the subscriber’s premises; it does not supply end-users, that is, the subscribers.
Further, says counsel, Foxtel’s submission overlooks the terms of the agreement between Foxtel Cable and subscribers. The critical clause is set out at para 16 above. It requires Foxtel Cable to provide “the Channels” – that is, the programming package selected by the subscriber – and Foxtel Management to provide the Retransmitted Free-to-Air Broadcasts. Counsel for Seven Cable contends this clause requires the two companies who conduct the service known as FOXTEL, not only to provide content but to provide delivery of the content; indeed, in the case of Foxtel Management, only delivery is to be provided. Counsel draws attention to the words used in cl 4.1 of the FOXTEL customer agreement:
“TMPL,(i.e. Telstra Multimedia) on behalf of FOXTEL, will install the Facilities to your home and maintain those facilities, whilst you receive the Service.” [Emphasis added]
Counsel for Seven Cable says:
“Under the customer contracts, both Foxtel Cable and Foxtel Management agree to provide a cable television service. This includes, as a necessary element, a service of carrying the channels to the end-user. Foxtel may outsource this carriage function to Telstra Multimedia, but this is irrelevant to the consideration of whether Foxtel is supplying a carriage service to the public. A freight company which offered an air freight service might engaged an airline to carry the freight from one city to another, but this does not prevent the freight company from supplying a service of carrying freight by air to its customers.”
Counsel submits it is not correct to say, as does Foxtel, that his client’s argument means every content service provider is also a carriage service provider; there are some situations – for example, a dial-up information service – in which the provider of the content gives no commitment about delivery, but merely makes information available to those who choose to access it.
Counsel for TARBS supplemented the Seven Cable submissions on this issue by referring to material published on FOXTEL’s website. That material advertises its packages and seeks subscriptions. The solicitors acting for Foxtel in these proceedings formally admitted their client solicits subscriptions. This is consistent with the financial arrangements between Foxtel and Telstra, as set out in the Broadband Co-operation Agreement. Clause 11 of that agreement requires Telstra Multimedia to pay the Foxtel Partnership a marketing incentive and marketing bonus in relation to recruitment of subscribers.
I prefer not to commit myself on the question whether, if Foxtel’s argument is accepted, the result is that there is no carriage service provider. That question does not arise for me; I do not think Foxtel’s argument should be accepted. I think the fundamental argument put on behalf of Seven Cable and TARBS is correct. I agree that the Telecommunications Act draws a distinction between a carriage service provider and a content service provider. The roles are conceptually distinct. However, if one person may fulfil both roles, as I agree, I do not understand how it can properly be said that the roles “are mutually exclusive”. The question whether a particular person has both roles is a question of fact in each case. In the present case, it is apparent that Foxtel Cable and Foxtel Management do more than provide content. They contract to deliver content. And they do so. They deliver to the public the listed carriage service known as FOXTEL subscription television. They do so by using the Telstra broadband, which is a network unit owned by a licensed carrier.
It is true that Foxtel Cable and Foxtel Management also use facilities that are not owned by Telstra, and are not part of a network unit; but that does not matter. Section 87(1) of the Telecommunications Act does not require that the network unit be the only element in the supply of the listed carriage service; it is sufficient that a network unit be used in that supply.
(iii) Section 87(5)
As an alternative to their submissions about s87(1), counsel for Seven Cable and TARBS rely on s87(5) of the Telecommunications Act. This subsection reads:
“(5) For the purposes of this Act, if:
(a)a person (the first person), for reward, arranges, or proposes to arrange, for the supply of a listed carriage service by a carriage service provider to a third person; and
(b)the first person would be a carriage service provider under subsection (1) or (2) if the person had supplied that carriage service; and
(c)the commercial relationship between the first person and the third person is, or is to be, governed (in whole or in part) by an agreement between the first person and the third person that deals with one or more matters relating to the continuing supply of the service (whether or not that supply is, or is to be, for a readily ascertainable period); and
(d)the conditions (if any) specified in a determination under subsection (8) are satisfied:
the person is a carriage service provider”.
It is agreed between the parties that there has been no determination under s87(8) of the Telecommunications Act. Consequently there are no conditions requiring satisfaction under para (d) of s87(5). For present purposes that paragraph may be disregarded.
Counsel for Seven Cable and TARBS argue the arrangement between FOXTEL and Telstra falls within subs (5). Considering separately each of paras (a), (b) and (c), they say:
(a)FOXTEL (the first person) for reward arranges for the supply of a listed carriage service by a carriage service provider (Telstra Multimedia) to a third person (each subscriber); and
(b)FOXTEL would be a carriage service provider under subs (1) if it supplied the carriage service; and
(c)The commercial relationship between FOXTEL and Telstra Multimedia is governed by an agreement between those parties that deals with matters relating to the continuing supply of the service.
The Foxtel argument is that s87(5) does not apply because the “listed carriage service” is not provided to a third person; it is supplied by Telstra Multimedia to FOXTEL. Counsel say that FOXTEL arranges for Telstra Multimedia to provide the service to itself (at the wall plug) to enable it to supply a content service.
In support of their argument, counsel for Foxtel refer to a paragraph in the Explanatory Memorandum relating to the Telecommunications Bill 1996, the Bill that became the Telecommunications Act of the following year. The provision that is now s87(5) of the Act was cl 86(5) of the Bill. The Memorandum said:
“Clause 86(5) is intended to ensure that persons generally known in the industry as switchless resellers and/or aggregators, and who, in a particular case, may not themselves be supplying a listed carriage service, are to be considered to be carriage service providers and subject to relevant obligations. The requirement for the agreement to deal with matters relating to the continuing supply of the service is intended to exclude retailers of customer equipment, such as mobile phone retailers, who sign the customer with a carriage service provider, but take no part in the continuing supply of the carriage service (for example, by subsequently billing the customer for the continuing supply of the service).” [Original emphasis]
This extract does not assist Foxtel’s argument. FOXTEL may properly be regarded as an aggregator of programs. Upon the assumption – contrary to my view – that it is not a supplier of a listed carriage service, according to this extract, it is “to be considered” by cl 86(5) a carriage service provider and subject to relevant obligations.
The words used in s87(5) should be given their natural meaning, reading them in the context in which they are used. FOXTEL uses Telstra Multimedia to enable it to supply to subscribers, not only the content aggregated by FOXTEL, but also the carriage service necessary to enable that content to appear on subscribers’ television sets. It does this for reward. If FOXTEL did not make that arrangement, but provided the broadband service itself, it would undoubtedly be a “carriage service provider”. Paragraph (c) is clearly satisfied in this case; there is a detailed ongoing relationship between FOXTEL and Telstra in relation to the supply of the service.
If, contrary to my view, s87(1) does not make FOXTEL a “carriage service provider”, s87(5) does so. On either approach, the claim made by Foxtel in proceeding N217 of 2000 must fail. I propose to dispose of the matter by making a declaration to the contrary of that sought in the Application.
Disposition
(i) Orders in matter N1095 of 1999
I recounted at para 9 above the direction made by Tamberlin J for separate trial of the issues, raised in the cross claim in proceeding N1095 of 1999, concerning the validity of the 1997 deeming statement and the 1999 declaration. Those issues are the subject, respectively, of the claims made in matters N1150 of 1999 and N1088 of 1999 respectively. I think it is appropriate for me to dispose of the issues by repeating, in respect of the cross claims in N1095 of 1999, the declarations I have announced in relation to matters N1150 of 1999 and N1088 of 1999.
(ii) Costs
Foxtel has substantially failed in proceedings N1088 of 1999 and N1150 of 1999. However, with assistance from Telstra, Foxtel succeeded in persuading me that the specification in the 1997 deeming statement of the optional adjunct services was invalid. Although I held that the invalid portion could be severed, so the deeming statement is not totally invalid, the issue about the optional adjunct services involved significant hearing time and effort. Accordingly, in the case of matter N1150 of 1999, I propose to award ACCC only one half the costs incurred by it. In matter N1088 of 1999, in relation to which it has been wholly successful, ACCC should have a full costs order.
The addition to the hearing of matters N1150 of 1999 and N1088 of 1999 of the issues raised in the cross claims in matter N1095 of 1999 had no effect on the duration of that hearing, or the extent of work in respect of it. However, it did have the effect of involving additional parties in the resolution of those issues: Seven Cable and, to a much lesser extent, TARBS. I think those parties should have an order for the costs incurred by them in relation to the issues raised in the cross claim. However, reflecting the limited success of the cause espoused by Seven Cable and TARBS in relation to the 1997 deeming statement, the order should cover only 75% of the incurred costs.
In matter N217 of 2000 there ought to be a costs order in favour of Seven Cable and TARBS, against the applicants, Foxtel Management and Foxtel Cable.
A difficulty may arise concerning the apportionment of hearing time between issues. It may assist if I indicate my view that issues relating to the 1997 deeming statement and issues relating to the 1999 declaration each occupied about 40% of the total hearing time, and issues relating to Foxtel’s status as a “carriage service provider” the remaining 20%.
I certify that the preceding two hundred and fifty-five (255) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.
Associate:
Dated: 8 May 2000
Counsel for the Foxtel Management Pty Limited and Sky Cable Pty Limited in N1088 of 1999, N1095 of 1999 and N1150 of 1999:
Dr G Flick SC and Mr R Lancaster
Counsel for Foxtel Management Pty Limited and Foxtel Cable Pty Limited in N217 of 2000:
Mr A J Meagher SC and Mr M Leeming
Solicitors for all the above parties:
Allen Allen & Hemsley
Counsel for Telstra Corporation Limited, Telstra Multimedia Pty Limited, Telstra Media Pty Limited:
Mr M A Pembroke SC and Dr J Griffiths
Solicitors for Telstra Corporation Limited, Telstra Multimedia Pty Limited, Telstra Media Pty Limited:
Mallesons Stephen Jaques
Counsel for Seven Cable:
Mr C Moore
Solicitors for Seven Cable:
Freehill Hollingdale & Page
Counsel for Television & Radio Broadcasting Australia Pty Limited – N271 of 2000:
Mr N A Cotman SC
Solicitors for Television & Radio Broadcasting Australia Pty Limited:
Peter Cornelius & Partners
Counsel for Australian Competition and Consumer Commission:
Mr A Robertson SC, Mr N J Williams and Ms M Painter
Solicitors for Australian Competition and Consumer Commission:
Australian Government Solicitor
Date of Hearing:
13, 14, 15, 16, 20, 21, 22 and 23 March 2000
Date of Judgment:
8 May 2000
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