Telecommunications (Participating Persons) Determination 2013 (No. 2)

EXPLANATORY STATEMENT

Telecommunications Universal Service Management Agency Act 2012

Telecommunications (Participating Persons) Determination 2013 (No. 2)  

Issued by the Authority of the Minister for Broadband, Communications and the Digital Economy

Authority

The Telecommunications (Participating Persons) Determination 2013 (No. 2) (the Determination) is made by the Minister for Broadband, Communications and the Digital Economy (the Minister) under subsection 92(2) of the Telecommunications Universal Service Management Agency Act 2012 (the TUSMA Act).  This provision provides that the Minister may determine in writing that a certain kind of person is not a ‘participating person’ for an eligible revenue period under the Act.

Purpose

The Determination exempts certain persons from being a ‘participating person’ under section 92 of the Act.  A consequence of this exemption is that such a person will be relieved from the liability to pay the levy amount (i.e. the amount assessed under section 100 of the Act) in relation to the eligible levy period for the financial year 2013-14 and subsequent eligible levy periods. 

Background

The TUSMA Act

In early 2012, as part of a package of legislation to achieve continuity of key telecommunications safeguards in the transition to the National Broadband Network, the government established a new statutory agency, TUSMA.  TUSMA has responsibility for the effective implementation and administration of service contracts or grants that deliver universal service and other public policy telecommunications outcomes.

As part of the reform package, the government consolidated the previous Universal Service Obligation (USO) and the National Relay Service (NRS) levies into a single levy to cover TUSMA’s costs (together with government funding).  The levy provisions in Part 6 of the Act are broadly based on the USO levy provisions contained in Part 2 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 (the TCPSS Act).

Under the new levy scheme, a ‘participating person’ will continue to lodge eligible revenue returns with the Australian Communications and Media Authority (the ACMA) and levy payments will continue to be based on the ACMA’s assessment of each participating person’s eligible revenue.

Under subsection 92(1) of the TUSMA Act, a person is a ‘participating person’ for an eligible revenue period if:

• the person was a carrier at any time during the eligible revenue period (paragraph 92(1)(a) of the TUSMA Act); or
• the Minister has made a written determination that carriage service providers are participating persons for the eligible revenue period and the person was a carriage service provider at any time during the eligible revenue period (paragraph 92(1)(b) of the TUSMA Act).

Currently, there is no written Ministerial determination under paragraph 92(1)(b) of the TUSMA Act.

Previous Determinations

On 4 July 2011, the Minister made the Telecommunications (Participating Persons) Determination 2011 (No. 1) (the TCPSS Determination).  The TCPSS Determination provided that participating persons with initial sales revenue, gross telecommunications sales revenue or eligible revenue of less than $25 million (the $25 million threshold), who lodged the requisite statutory declaration with the ACMA within the specified timeframe for the eligible revenue period, were exempted from being participating persons under the TCPSS Act (these persons were classified as ‘USO non- participating persons’). 

The TCPSS Determination applies in relation to the eligible revenue period for the 2010‑2011 financial year and subsequent eligible revenue periods.  However, as this Determination relies on the definition of eligible revenue period in the TCPSS Act, the last eligible revenue period the Determination applies to is the 2011-2012 eligible revenue period.  

On 31 January 2013, the Minister made the Telecommunications (Participating Persons) Determination 2013 (the PP Determination).  This Determination was effectively a short term solution for the transition to the TUSMA Act, until the ACMA made a determination under section 93 of the TUSMA Act (in relation to calculating the eligible revenue of a participating person for an eligible revenue period), given the PP Determination relies on that ACMA instrument for much of its terminology.

The PP Determination referred to the TCPSS Determination and exempted a person from being a ‘participating person’ (pursuant to section 92 of the TUSMA Act) in relation to the first eligible revenue period under the TUSMA Act (i.e. the 2011-2012 eligible revenue period). 

A person that is exempt from being a ‘participating person’ under the PP Determination is not required to comply with certain reporting obligations and is not required to contribute to the levy under the TUSMA Act (in a similar manner as if the person was exempt under the TCPSS Determination).  Further, those persons that are carriers are also exempt from annual carrier licence charges for that financial year in accordance with the Australian Communications and Media Authority (Annual Carrier Licence Charge) Direction 2011.  Carriers continue to be subject to the requirements of the Telecommunications Act 1997, including the provision of information to the ACMA where specified.

Arrangements for the 2012-2013 eligible revenue period and subsequent eligible revenue periods

It is the government’s intention that persons who fall below the $25 million threshold should remain non-participating persons under the TUSMA Act in relation to the 2012‑2013 eligible revenue period and subsequent eligible revenue periods.  This reflects the government’s continuing commitment to remove unnecessary red tape in telecommunications regulation.

The Determination substantially reflects the criteria in the TCPSS Determination in assessing the types of persons that are ‘non-participating persons’ under the TUSMA Act.  However, the main difference is that this Determination classifies an entity as a ‘non-participating person’ in circumstances where that person is an externally-administered body corporate or is deregistered at the end of the specified timeframe, an eligible statutory declaration was not provided to the ACMA within the specified timeframe and the ACMA is reasonably satisfied that if such a declaration was provided, the requirements of being a non-participating person would have been met.

As with the TCPSS Determination, the Determination provides clear benefits to smaller carriers (or, if applicable, carriage service providers) by reducing their compliance burdens.  These benefits are achieved by absolving such persons from having to submit eligible revenue returns under the TUSMA Act, which can be a resource-intensive and time-consuming process.  They are also relieved of the costly requirement to have such returns audited.  Whilst larger entities may be able to absorb such burdens, smaller entities would face significant difficulties in doing so.

Consultation

The ACMA was consulted in relation to the making of this Determination.

An exposure draft of the Direction was released to carriers on 14 May 2013 for a two week consultation period ending Tuesday 28 May 2013. Two submissions were received, neither of which raised any substantive issues regarding the drafting of the instrument.

Regulatory impact

The Office of Best Practice Regulation (the OBPR) has agreed that the regulatory changes arising from the Determination are machinery in nature and that a Regulation Impact Statement is not required.

Statement of compatibility with human rights

This statement of compatibility is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

The Determination exempts certain persons from being participating persons for the purposes of the Act.  This will alleviate these persons from the liability to pay a levy amount being an amount assessed under the Act. 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.  It does not engage any of the applicable rights or freedoms and does not raise any human rights issues.

The Determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.  

Notes on sections

Section 1 - Name of Determination

Section 1 provides that the name of the Determination is the Telecommunications (Participating Persons) Determination 2013 (No. 2).

Section 2 - Commencement

Section 2 provides that the Determination commences on the day after it is registered on the Federal Register of Legislative Instruments.

Section 3 - Application

Section 3 provides that the Determination applies in relation to the 2012-2013 financial year (i.e. the second eligible revenue period under the TUSMA Act) and any subsequent financial years. 

Section 4 - Definitions

This section defines the terms used in the Determination.

Subsection 4(1) – General definitions

The definitions used in this provision are substantially replicated from subsections 4(1) and 4(2) of the TCPSS Determination.   

The term ‘specified timeframe’ is used in subsection 4(3) of the Determination and refers to the date specified in an instrument made by the ACMA under paragraph 91(1)(b) of the TUSMA Act.  Currently, the applicable timeframe is within four months following the end of the eligible revenue period, as set out in the Telecommunications Universal Service Management Agency (Eligible Revenue) Determination 2013 (the Eligible Revenue Determination). 

The term ‘ultimate Australian parent entity’ is defined as having the same meaning as in the Eligible Revenue Determination.  Section 5 of the Eligible Revenue Determination provides this definition.

A person’s initial sales revenue, gross telecommunications sales revenue and eligible revenue for the purposes of the Determination are to be calculated with reference to each of those amounts under either:

• the TUSMA Act (in the case of eligible revenue); or
• the Eligible Revenue Determination (in the case of gross telecommunications sales revenue and initial sales revenue),

as if that person were a participating person under the TUSMA Act.

Subsection 4(2) – ‘eligible statutory declaration’

Subsection 4(2) defines the term ‘eligible statutory declaration’ for the purposes of the Determination.  This concept was included in the TCPSS Determination and consistent with that Determination, the declaration must be made by a person with appropriate authority for the company or individual and complies with the Statutory Declarations Act 1959 (Stat Dec Act). 

Under the Stat Dec Act, a person who wilfully makes a false statement is guilty of an offence and may be fined, jailed or both.

Subsection 4(3) – ‘non-participating person’

Subsection 4(3) defines the term ‘non-participating person’.  Paragraphs 4(3)(a), (b) and (c) provide that if a person’s initial sales revenue, gross telecommunications revenue or eligible revenue is less than the $25 million threshold and an eligible statutory declaration is provided to the ACMA within the specified timeframe to advise that one of these thresholds has been met, a person will be a ‘non-participating person’ (these paragraphs are substantially based on the definition included in the TCPSS Determination). 

Paragraph 4(3)(d) provides that a person is also a ‘non-participating person’ if the person was an ‘externally-administered body corporate’ (defined by reference to the Corporations Act 2001) or is deregistered prior to the end of the specified timeframe and the ACMA is reasonably satisfied that the requirements in either subparagraph 4(3)(a), 4(3)(b) or 4(3)(c) would have been met if an eligible statutory declaration had been  provided  within the specified timeframe to the ACMA.  This category was not previously in the TCPSS Determination. 

This change provides the ACMA with greater flexibility to assess a person as a ‘non-participating person’, in circumstances where it is clear that a person’s relevant revenue would be below the $25 million threshold in the relevant eligible revenue period even where an eligible statutory declaration was not provided and where that person is an ‘externally-administered body corporate’ or is deregistered prior to the end of the specified timeframe. 

An example of how paragraph 4(3) works is set out below.  

Example

For the 2012-13 eligible revenue period:

On its own, Carrier A will satisfy subparagraphs 4(3)(a)(i), 4(3)(b)(i) or 4(3)(c)(i) as its initial sales revenue, gross telecommunications sales revenue and eligible revenue are all under $25 million.  On its own, Carrier B will satisfy subparagraphs 4(3)(b)(i) or 4(3)(c)(i) as its gross telecommunications sales revenue and eligible revenue are both under $25 million. 

If eligible statutory declarations are provided separately by Carrier A and Carrier B in relation to one of these subparagraphs, they will be non-participating persons under the Determination.

Carrier C ceased to exist before the end of the 2012-2013 eligible revenue period.  Paragraph 4(3)(d) provides the ACMA with the ability to determine that Carrier C would have been a non-participating person had the eligible statutory declaration been provided.  Given this, Carrier C is a non-participating person under the Determination.  

Subsection 4(4) - ultimate Australian parent entity

Subsection 4(4) substantially replicates subsection 4(5) of the TCPSS Determination.  This provision sets out that if a person has the same ‘ultimate Australian parent entity’ (a term defined in the Eligible Revenue Determination) as one or more other carriers (or carriage service providers, if a determination under paragraph 92(1)(b) of the TUSMA Act is in force), then each carrier (or applicable carriage service provider) must calculate initial sales revenue, gross telecommunications sales revenue and eligible revenue on a group basis, accounting for revenues and deductions as a whole. 

As with the previous TCPSS Determination, subsection 4(4) has been included to protect against an ultimate Australian parent entity from artificially restructuring a group of entities to meet the $25 million threshold (i.e. and having each entity classified as a ‘non-participating person’).  In submitting the eligible revenue returns, the group of entities are able to choose how to account for their revenue/deduction calculations, in accordance with the options available under the Eligible Revenue Determination (i.e. either as a group or on an individual basis).  An example of how subsection 4(4) operates is set out below.

Example

Continuing on from the example above, Carrier A is the parent company of Carrier B.  Applying the definition in subsection 4(4) of the Determination, Carrier A has the same ultimate Australian Parent Company as Carrier B.  Given this, Carrier A must calculate its initial sales revenue, gross telecommunications sales revenue and eligible revenue under this Determination on a group basis (i.e. together with Carrier B). 

The combined revenue for Carrier A and Carrier B will be greater than the thresholds in subparagraphs 4(3)(a)(i) or subparagraph 4(3)(b)(i) of the Determination as the combined initial sales revenue and gross telecommunications sales revenue are above $25 million.  However, as the combined eligible revenue for Carrier A and Carrier B is below $25 million, subparagraph 4(3)(c)(i) of the Determination would be satisfied.  

If eligible statutory declarations are provided by both Carrier A and Carrier B in relation to subparagraph 4(3)(c)(ii) of the Determination, both carriers will be non-participating persons under the Determination.

Section 5 - Determination

Section 5 exempts a non-participating person from section 92 of the Act for an eligible revenue period.  This Determination applies to the 2012-2013 eligible revenue periods and beyond.

Section 92 of the TUSMA Act specifies who is, for the purpose of the Act, a participating person for an eligible revenue period.  An exemption from section 92 of the TUSMA Act means that the person is not liable to pay a levy amount under the TUSMA Act for the eligible levy period immediately following that eligible revenue period.