EXPLANATORY STATEMENT
Issued by the authority of the Minister for Communications
Acts Interpretation Act 1901
Competition and Consumer Act 2010
Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 Instrument of Revocation 2014
Purpose
The purpose of the Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 Instrument of Revocation 2014 (the Revocation Instrument) is to revoke the Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 (the Direction).
Background
Prior to its repeal in 2011, section 151BUAAA of the Competition and Consumer Act 2010 (the Act) required the then Minister to give a special direction under section 151BUAA of that Act to the Australian Competition and Consumer Commission (ACCC) to make particular record-keeping rules applying to Telstra Corporation (Telstra). These record-keeping rules require Telstra to keep and retain particular records and prepare reports relating to Telstra’s wholesale operations and its retail operations.
On 19 June 2003, the Direction was made. The Direction requires the ACCC to make particular record-keeping rules for Telstra.
The Accounting Separation Framework
The Direction requires the ACCC to make record-keeping rules on current costs, imputation, and non-price terms and conditions relating to Telstra’s wholesale and retail operations. The Direction also requires the ACCC to publish reports on the level of competition in the supply of telecommunications services to the corporate sector.
In accordance with the Direction, the ACCC issued three accounting separation record-keeping rules under section 151BU of the Act.
First, the Current Cost Accounts Record-Keeping and Reporting Rules require Telstra to prepare financial statements in relation to all services that the regulatory accounting framework applies on both a historic and current cost basis. These record-keeping rules also require Telstra to provide reports to the ACCC on a periodic six-monthly and annual basis, which includes those financial statements.
Second, the Imputation Testing Record-Keeping and Reporting Rules require the ACCC to publish quarterly reports, prepared by Telstra, which show the margin that Telstra’s retail business units would have if they were to purchase the core services from Telstra’s wholesale business unit at the same price that Telstra offers the service to its wholesale customers. A core service means the domestic Public Switched Telephone Network originating and terminating access services, the local carriage service and the unconditioned local loop service.
Third, the Non Price Terms and Conditions Key Performance Indicator Record-Keeping and Reporting Rules require Telstra to prepare and provide to the ACCC for publication each quarter a report that compares its performance in supplying non-price elements of specified wholesale services to its wholesale customers and itself.
The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Act 2010
The Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Act 2010 (the Amending Act) amended the Telecommunications Act 1997 to require Telstra to either functionally separate its retail business units from its wholesale and network business units or voluntarily structurally separate. Under either option, strengthened transparency and equivalence requirements would apply. In light of this, section 151BUAAA of the Act was repealed by the Amending Act.
A transitional provision was included in the Amending Act to provide that the repeal of section 151BUAAA of the Act did not affect the continuity of the Direction. The ACCC is required to continue to comply with the Direction and Telstra is still required to comply with any rules made by the ACCC in accordance with the Direction. This transitional provision maintained the accounting separation framework during the period that Telstra’s functional separation or structural separation arrangements were being established.
On 6 March 2012, Telstra’s structural separation arrangements came into force. These arrangements contain interim equivalence and transparency obligations regarding access to Telstra’s regulated services in the period leading up to structural separation. The arrangements also include compliance monitoring processes to provide the ACCC with transparency over Telstra’s compliance with the structural separation undertaking (SSU).
The ACCC’s acceptance of Telstra’s SSU means that it is satisfied that the SSU provides for appropriate and effective interim transparency and equivalence arrangements to apply during the period that Telstra is structurally separating. As such, the accounting separation framework has been superseded.
Consultation
On 6 February 2014, the Department of Communications published a draft revocation instrument on its website for public comment. The Department contacted key stakeholders in the telecommunications sector as well as the ACCC.
Three submissions were received. Two submissions supported repeal of the Direction, the other submission did not. One submitter argued that the Direction and associated RKRs provide the ACCC and access seekers with information that provides an indication of Telstra’s possible engagement in anti-competitive behaviour.
In follow-up discussions, the ACCC indicated that information provided by Telstra under its SSU adequately replaces the information received under the Accounting Separation RKRs. The ACCC will also retain the power to seek additional information if it is considered necessary to do so.
Other details
The Revocation Instrument is a legislative instrument for the purposes of the Legislative Instruments Act 2003 (LIA) and shall commence on the day after it is registered in the Federal Register of Legislative Instruments (FRLI).
Revocation of the Direction would mean that the ACCC is no longer required to maintain the record-keeping rules specified in the Direction.
Details of the accompanying Revocation Instrument are set out in the Attachment.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 Instrument of Revocation 2014
This Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 Instrument of Revocation 2014 (the Revocation Instrument) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Revocation Instrument
The Revocation Instrument revokes the Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 (the Direction).
On 19 June 2003, the then Minister made the Direction to the Australian Competition and Consumer Commission (the ACCC) under subsections 151BUAA(1), 151BUAA(1B) and 151CMA(1) of the Trade Practices Act 1974, now the Competition and Consumer Act 2010. This Direction required the ACCC to implement particular record-keeping rules for Telstra Corporation Limited (Telstra).
As structural separation arrangements came into force in 2012, the accounting separation framework has been superseded. The revocation of the Direction means the ACCC is no longer required to maintain record-keeping rules specified in the Direction.
Human rights implications
The Revocation Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Revocation Instrument is compatible with human rights as it does not raise any human rights issues.
Attachment
Details of the Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 Instrument of Revocation 2014
Section 1 – Name of instrument
Section 1 provides that the title of the Revocation Instrument is the Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003 Instrument of Revocation 2014.
Section 2 – Commencement
Section 2 provides that the Revocation Instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.
Section 3 – Revocation
Section 3 provides for the revocation of the Australian Competition and Consumer Commission (Accounting Separation—Telstra Corporation Limited) Direction (No. 1) 2003.
Revocation of the Direction means that the Australian Competition and Consumer Commission (the ACCC) is no longer required to maintain the record-keeping rules, disclose information and prepare reports on competition as specified in the Direction. This does not have the effect of revoking record-keeping rules already made under subsection 151BU(1) of the Act or preventing the ACCC from preparing further reports. The revocation of record-keeping rules, including the requirement of any appropriate transitional measures, is a matter for the consideration of the ACCC.
Section 4 – Expiry
Section 4 provides that the Revocation Instrument expires on the day after it commences having had its effect of revoking the Direction. By operation of subsection 7(3) of the Acts Interpretation Act 1901 and section 13 of the Legislative Instruments Act 2003, an expired instrument is taken to be repealed.