EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Communications
Telecommunications Act 1997
Telecommunications (Agreements for Compliance with Structural Separation Undertaking) Determination 2014
Authority
Subsection 577BA(9) of the Telecommunications Act 1997 (the Act) enables the Minister, by legislative instrument, to determine that subsection 577BA(8) applies, and is taken to have always applied, to a contract, agreement or understanding entered into between Telstra Corporation Limited (Telstra) and NBN Corporation Limited (NBN Co), as if Telstra had entered into such a contract, arrangement or understanding in order to comply with a structural separation undertaking in force under section 577A of the Act.
Purpose
Part IV of the Competition and Consumer Act 2010 (CCA) sets out certain prohibitions related to anti-competitive conduct, including those related to cartel conduct, anti-competitive agreements, exclusionary provisions and misuse of market power. Section 51 of the CCA provides in part that, in determining whether a person has contravened Part IV of the CCA, certain matters must be disregarded, including anything specified in, and specifically authorised by, an Act.
To allow for and to promote the national interest in structural reform of the telecommunications industry, section 577BA of the Act authorises certain types of conduct by Telstra and NBN corporations for the purposes of subsection 51(1) of the CCA. These structural reforms are concerned with the provision of better broadband and more effective competition, particularly through the rollout of a wholesale-only national broadband network (NBN) and the structural separation of Telstra. In this context, NBN corporations encompasses NBN Co and other companies over which NBN Co is in a position to exercise control, as defined in the National Broadband Network Companies Act 2011. This means that conduct authorised under section 577BA must be disregarded when considering if a person who has engaged in such conduct has contravened Part IV of the CCA.
In 2011, Telstra and NBN Co entered into four agreements (collectively known as the “Definitive Agreements”): the Access Deed, the Implementation and Interpretation Deed, the Subscriber Agreement and the NBN Infrastructure Services Agreement. The original four Definitive Agreements were authorised under section 577BA of the Act. Specifically, under section 577BA(3) of the Act:
(a) entry into the Definitive Agreements by Telstra and NBN Co;
(b) conduct engaged in by Telstra or NBN Co to give effect to a provision of the Definitive Agreements; and
(c) conduct engaged in by another NBN corporation in order to facilitate NBN Co giving effect to a provision of the Definitive Agreements;
was authorised for the purposes of subsection 51(1) of the CCA.
In order to implement the multi-technology mix NBN model and ensure the NBN can be rolled out in a swift and cost effective manner, amendments to the existing Definitive Agreements are required. The amendments include the progressive transfer of certain parts of Telstra’s legacy networks to allow NBN Co to construct the NBN with a range of technologies and also include the negotiation of a supplementary arrangement covering licensing arrangements to accommodate the delivery of specified services (i.e. the “Continuity Deed”) and a deed to give effect to the amendment, and amendment and restatement, of the original four Definitive Agreements (known as the “Deed of Amendment and Restatement - Definitive Agreements”). The four Definitive Agreements (as amended and amended and restated), together with the new Continuity Deed and Deed of Amendment and Restatement – Definitive Agreements, are referred to below as the Amendment Documents and are the subject of the Determination.
Subsection 577BA(8) of the Act provides that if Telstra enters into a contract, arrangement or understanding (here abbreviated to ‘agreement’) with an NBN corporation and does so in order to comply with an undertaking under section 577A of the Act which is then in force, then:
(a) the entry into the agreement by Telstra and the NBN corporation;
(b) conduct engaged in by Telstra or the NBN corporation to give effect to a provision of the agreement; and
(c) conduct engaged in by another NBN corporation in order to facilitate the first‑mentioned NBN corporation giving effect to a provision of the agreement;
is authorised for the purposes of subsection 51(1) of the CCA.
The object of the Determination is to ensure that entry into the Amendment Documents, and compliance with the Amendment Documents, by Telstra or NBN Co (or any other NBN corporation), will not contravene Part IV of the CCA. The Determination provides regulatory certainty for both Telstra and NBN Co in implementing the Government’s structural reform and NBN policies.
Background
By supporting the rollout of the NBN, the Definitive Agreements facilitate the provision of better broadband to Australians and more effective competition, including through the structural separation of Telstra.
On 27 February 2012 the Australian Competition and Consumer Commission (ACCC) accepted Telstra’s structural separation undertaking (SSU) under section 577A of the Act and it commenced on 6 March 2012.
Under the SSU, Telstra has undertaken to structurally separate its fixed-line networks progressively. Telstra will cease to supply fixed-line voice and broadband services over its copper and hybrid fibre-coaxial (HFC) networks and commence to supply those services over the NBN as the NBN is rolled out. The SSU also imposes obligations on Telstra designed to ensure equivalence and transparency in relation to the supply of Telstra’s services to wholesale customers during the period in which transition to the NBN occurs.
A strategic review by NBN Co in December 2013 recommended that the NBN should be completed using a multi-technology mix to deliver fast broadband sooner and at less cost to taxpayers. In light of this, the Government issued a new Statement of Expectations to NBN Co on 8 April 2014. The Statement instructs NBN Co to determine which technologies are to be used for the NBN in any given area on a case-by-case basis, so long as the NBN is constructed within a defined cost and in compliance with certain other criteria. The technologies that may be used by NBN Co include fibre-to-the-node (FTTN), fibre-to-the-premises (FTTP), fibre-to-the-basement (FTTB), HFC, fixed wireless and satellite.
The intention of the Government continues to be the delivery of better broadband to Australians and more effective competition, including through the structural separation of Telstra. Telstra’s SSU will continue to remain in force and effect.
Consultation
The Department of Communications consulted with Telstra Corporation Limited and NBN Co Limited on the terms of a draft of the Determination.
Regulation Impact Statement
The Office of Best Practice regulation has advised that the Determination is machinery in nature and therefore the preparation of a Regulation Impact Statement is not required (ID 17425).
Other details
The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Statement of Compatibility with Human Rights for the Determination is set out in the Attachment 1.
Details of the accompanying Determination are set out in the Attachment 2.
ATTACHMENT 1
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Telecommunications (Agreements for Compliance with Structural Separation Undertaking) Determination 2014
The Determination 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 Determination
The Telecommunications (Agreements for Compliance with Structural Separation Undertaking) Determination 2014 (the Determination), made under subsection 577BA(9) of the Telecommunications Act 1997 (the Act) authorises certain conduct for the purposes of section 51 of the Competition and Consumer Act 2010 (CCA).
The conduct which is authorised is entry by Telstra Corporation Limited (Telstra) and NBN Co Limited (NBN Co) into the following contracts and compliance with the terms of those contracts:
(a) the four amended and amended and restated Definitive Agreements, being the Access Deed, the Infrastructure Services Agreement, the Implementation and Interpretation Deed and the Subscriber Agreement (in each case, which were originally entered into in June 2011); and
(b) two new deeds:
- the Continuity Deed, covering a new licensing arrangements which provide for continuity of existing services provided over Telstra’s copper and hybrid fibre-coaxial cable (HFC) networks during the transition to the national broadband network (NBN) and on an ongoing basis for services which are not migrating to the NBN (e.g. subscription television services currently supplied over Telstra’s HFC network); and
- the Deed of Amendment and Restatement – Definitive Agreements which, amongst other matters, gives effect to the amendments and amendments and restatements of the Definitive Agreements.
The Definitive Agreements (as these are to be amended and amended and restated) and the two new deeds are necessary to give effect to the Government’s structural reform and its multi-technology national broadband network policies. The Determination will ensure that Telstra and NBN Co will not, in performing their obligations under these documents, contravene the anti-competitive regulations under Part IV of the CCA.
The Determination provides regulatory certainty for both Telstra and NBN Co.
Human rights implications
The Determination does not engage any of the applicable rights or freedoms.
Conclusion
The Determination is compatible with human rights as it does not raise any human rights issues.
ATTACHMENT 2
Details of the Telecommunications (Agreements for Compliance with Structural Separation Undertaking) Determination 2014
Section 1—Name of the Determination
This clause provides that the title of the Determination is the Telecommunications (Agreements for Compliance with Structural Separation Undertaking) Determination 2014.
Section 2—Commencement
This section provides that the Determination commences on 14 December 2014.
The Determination is subject to the ordinary sunsetting arrangements under Part 6 of the
Legislative Instruments Act 2003, meaning that it will sunset (i.e. expire) on the first 1 April occurring 10 years after the Determination comes into effect.
Section 3—Definitions
Section 3 sets out definitions of key terms used in the Determination.
The term Access Deed means the deed of that name entered into by Telstra Corporation Limited (Telstra) and NBN Co Limited (NBN Co) on 23 June 2011 and amended and restated pursuant to the Deed of Amendment and Restatement. It sets out the commercial commitments for the supply of the NBN Co basic service offering and charging arrangements for certain wholesale services.
All references to Act are to the Telecommunications Act 1997 (Cth).
The term Continuity Deed means the deed of that name entered into by Telstra and NBN Co on 14 December 2014. This is a new deed which covers, amongst other matters, the terms of Telstra’s licence from NBN Co to access copper loop and sub-loops for ADSL and voice services during the migration period for the national broadband network (NBN) and to continue to provide special services, services to non-premises and services over long copper tails until such time as these are migrated to the NBN; access by Telstra to part of the hybrid fibre-coaxial (HFC) network after it is transferred to NBN Co to provide broadband services during the migration period and for the ongoing provision of Foxtel services; and arrangements for access by each party to the other’s infrastructure in or associated with an NBN rollout region or proposed rollout region.
The term Deed of Amendment and Restatement means the “Deed of Amendment and Restatement - Definitive Agreements” entered into by Telstra and NBN Co on 14 December 2014 which, amongst other matters, documents conditions precedent for the amendment and restatement of the Access Deed, the Implementation and Interpretation Deed, the Infrastructure Services Agreement and the Subscriber Agreement.
The term Implementation and Interpretation Deed means the deed of that name entered into by Telstra and NBN Co on 23 June 2011, amended on 14 December 2014 and further amended and restated pursuant to the Deed of Amendment and Restatement. This Deed covers a range of ancillary and operative matters, including common provisions incorporate dingo the other five agreements/deeds.
The term Infrastructure Services Agreement means the agreement of that name entered into by Telstra and NBN Co on 23 June 2011, amended on 14 December 2014 and further amended and restated pursuant to the Deed of Amendment and Restatement. This Agreement sets out the terms for NBN Co’s long-term access to a range of Telstra infrastructure and provides for the sale of Telstra’s copper lines and hybrid fibre-coaxial lines and other infrastructure.
NBN Co means NBN Co Limited (ACN 136 533 741) as the company exists from time to time even if its name is later changed.
A key concept used in defining the contracts, agreements and understandings which are subject to the Determination is national broadband network. Section 5 of the National Broadband Network Companies Act 2011 defines this as the national telecommunications network for the high speed carriage of communications, where an NBN corporation, the definition of which includes NBN Co, has been, is, or is to be, involved in the creation or development of the network.
Subscriber Agreement means the agreement of that name entered into by Telstra and NBN Co on 23 June 2011, amended on 14 December 2014 and further amended and restated pursuant to the Deed of Amendment and Restatement. This Agreement sets out the terms governing the disconnection of copper-based customer access network services and HFC broadband services by Telstra and other related disconnection and migration processes.
Telstra means Telstra Corporation Limited (ACN 051 775 556) as the company exists from time to time (even if its name is later changed).
Undertaking means the undertaking given by Telstra to the Australian Competition and Consumer Commission (ACCC) under subsection 577A(1) of the Act and which was accepted by the ACCC. This undertaking, which is the SSU, came into force on 6 March 2012 and remains in force under section 577A of the Act.
Section 4—Determination
Under section 4 of the Determination, the Minister has determined, as permitted by subsection 577BA(9) of the Act, that subsection 577BA(8) of the Act applies, and is taken to have always applied, to each of the six specified contracts, that is:
(a) the Access Deed;
(b) the Continuity Deed
(c) the Deed of Amendment and Restatement;
(d) the Infrastructure Services Agreement;
(e) the Implementation and Interpretation Deed; and
(f) the Subscriber Agreement;
as if Telstra had entered into each of those contracts in order to comply with the SSU in force under section 577A of the Act.
Section 4 of the Determination provides regulatory certainty for both Telstra and NBN Co in implementing the Government’s policy to provide better broadband and more effective competition, including through the structural separation of Telstra.