The Statement clearly set out the policy intentions for reform, with detailed explanations of the rationale for those reforms. Turning policy statements into legislation which reflected that policy was the challenge.
Perhaps the most difficult task confronting the legislative drafters was turning the Statement on carrier monopoly rights into a workable definition of what would be reserved to carriers.
The Statement had, by way of illustration, listed the services which should be included in the carriers' monopoly. However, DTC rejected that approach. Defining separate services included in the Statement as reserved to carriers would be an `open invitation to the legal fraternity' to advise potential service providers to develop their services in a way which would avoid it being defined as reserved to carriers.
Another approach would develop broad guidelines on defining reserved services and give AUSTEL discretion to decide individual cases. The approach was also rejected because it would not be acceptable to industry and would give AUSTEL a role beyond simply administering a government determined boundary.[72]
DTC's solution was to define carrier monopoly in terms of service provision. The carriers would have the exclusive right to supply reserved services. A service was a reserved service if it was a service for primary communications carriage between two or more cadastrally separated places or persons.[73] A telecommunications service was for primary communications so far as it consists only of the functions necessary:
(a) to arrange, operate and manage connectivity across the telecommunications network...; and
(b) to carry communications across the network....or to carry communications across the network in a way that does not result in ... service delivery standards being exceeded in the supply of the service.[74]
Generally, Telecom's exclusive right was to supply reserved services within Australia; OTC's, to supply reserved services between Australia and places outside Australia; and AUSSAT's, to supply reserved services within Australia by satellite based facilities.[75]
The policy intention of the Statement was there: the `source of the cross subsidy' would not be jeopardised.[76] The Act's definition of reserved rights protected the carriers' monopoly in two ways. The first was to reserve to carriers the right to provide all essentially public services - any service between properties. `Anything attached to but outside the network' was open to competition'.[77]
The second was to define the exclusive right not only in terms of the communications carriage, but also of functions including arrangements, operation and management of `connectivity'. To the DTC, those terms were included to ensure that the carriers had `sufficient functions reserved to them to enable them to provide the full range of services....'[78] The effect of both parts of the definition was to largely encompass those services originally listed in the Statement as what should be included in the carriers' monopoly.
The government recognised that, over time, the definition might need to be clarified or changed; as more intelligence is built into the network, the current service reservation could allow carriers to expand their monopoly services into areas which were meant to be competitive. The Minister was therefore given the power to change the definition by regulations.[79]
Carriers also had the exclusive right to supply, install and maintain equipment connected to and within the telecommunications network boundaries. Equipment attached to a carrier's network but beyond its boundaries was open to competition.[80] AUSTEL could only authorise a person to install and maintain facilities connected to and within a carrier's network if the carrier had agreed to the authorisation and, if the carrier were Telecom, AUSTEL was satisfied that granting the authorisation would not `unreasonably' result in Telecom failing to carry out its community service obligations.[81]
Other monopoly areas set out in the Statement were reflected in the legislation. Telecom was given the exclusive right to supply, install and maintain public payphones in Australia.[82] Telecom's monopoly over the provision, installation and maintenance of the first telephone `for a basic telephone service' was preserved, but only until 30 June 1991.[83]
The policy aim of government was twofold: to protect the carriers' reserved services, ensuring `the source of the cross subsidy is not jeopardised' while `promoting competition outside the monopoly area'.[84] The definition of services open to competition, the class licensing system and obligation on the carriers to provide infrastructure capacity were how the twin policy objectives were incorporated into legislation.
The Statement had discussed the possibility of a class licensing system for competitive services, suggesting individual service providers notify the regulator of their proposed services and allowing a limited time for the regulator to screen individual proposed services.[85]
Under the legislation, AUSTEL could issue class licences which included conditions about the way services were supplied, and prohibitions on using services for illegal purposes or in ways which would harm the network.[86] The idea of screening individual service proposals, however, was dropped by the legislation.
Services provided under a class licence could be registered with AUSTEL if the individual service provider chose to do so; registration was not, however, necessary to comply with and be deemed licensed under, the appropriate class licence.[87].
The definition of VAS used in Act was simple: any telecommunications service not reserved to the carriers was a value added service, and all VAS were open to competition.[88]
The `licensing principle' for VAS reflected government policy to protect carriers' monopoly: VAS were `not to be supplied in a way that would result in a person engaging in conduct that would involve an infringement' of the carriers' reserved rights. And AUSTEL must not issue a VAS class licence unless it was satisfied that licence conditions would ensure that VAS would be supplied in ways consistent with the licensing principle.[89] The class licence for VAS, issued by AUSTEL shortly after the Act was passed, largely reflected the Statement.[90]
The Statement's recommendations on restricting private networks were also reflected in the Act; private networks were confined to carrying private traffic by the person supplying the service or by persons `all of whom have a common interest with each other'.[91]
The `licensing principle' for private networks further confined network capacity use: private networks must not be supplied in a way which allowed the sale or disposal of capacity to third parties or which would involve infringing monopoly rights of carriers. Again, AUSTEL was required to ensure the class licence for private networks meant they were supplied only in ways consistent with the licensing principle.[92] The Private Networks Class Licence, issued when the Act was passed, reinforced the restrictions imposed by the Act.[93]
The importance of the legislative provisions on VAS and private networks was not so much in the new services which would be open to competition; many of the services had previously been permitted by Telecom on an ad hoc basis and the restrictions on private networks stayed largely in place.
The real significance of the changes lay in the increased certainty for competitors in what would be allowed, the class licensing system which permitted service provision without an individual licensing process, and the fact that an independent regulator issued class licences and oversaw their implementation. The carriers were, as well, required to connect VAS and private network providers to the network, and were prohibited from discriminating against those providers in the provision and charging of reserved services.[94] They also had to develop accounting systems capable of identifying costs related to the supply of reserved services as against costs relating to the supply of other services and activities.[95]
AUSTEL's general functions were, in large part, those envisaged in the 1988 Statement: protection of carriers' reserved rights, protection of competitors from carriers' unfair practices, consumer protection, promotion of carrier efficiency and technical regulation.[96]
The breadth and diversity of AUSTEL's roles, however, were questioned at the time; AUSTEL was to be overall industry regulator, advisor to sectors of the industry, and reporter to government on industry performance. Summing up the breadth of its roles, AUSTEL was to be:
... a quasi Trade Practices Commission, Ombudsman, Consumer Affairs Commission, Prices Surveillance Authority, Industries Assistance Commission, industry advisory body, government adviser, commission of inquiry into policy questions, efficiency auditor and universal protector of everybody against everybody else.[97]
The commentator rather prophetically suggested it would be difficult for AUSTEL to carry out all those roles `vigorously', particularly since many of the roles are both difficult and resource intensive.[98]
There is also little mention in the legislation of processes AUSTEL was to use in carrying out its functions. AUSTEL was under a general obligation to consult widely `where appropriate and practicable to do so' and could establish advisory committees to assist it.[99] However, there was no process set out for public inquiries or hearings, reflecting the government's intention that the Act not `foster legalistic processes which could be used to thwart AUSTEL's legitimate decision making processes....'[100]
There was also criticism at the time of the breadth of Ministerial powers over AUSTEL.[101] The extent of government powers under the Act was defended, however, with the statement that it `had always been' the government's aim `to reclaim for the government and the parliament the policy making role which was effectively signed over to Telecom in 1975.[102] Reading through the Statement, however, it must be questioned whether the aim was to give Telecom's powers to an independent regulator or to government.
Proposed reforms to Telecom were largely implemented in the Australian Telecommunications Corporation Act 1989.
The government's social policies for telecommunications were reflected in what were called Telecom's Community Service Obligations (CSOs).[103] While Telecom was to continue to meet its CSOs out of its revenues, the government's aim for more clearly defined CSOs and transparency in their costing were met. Telecom must set out its strategies and policies to meet its CSOs in its corporate plan and must estimate the cost of carrying out those CSOs.[104]
The other requirements on Telecom under its new Act largely reflected the general requirements of GBE reform: the requirement for corporate and financial planning, new accountability requirements to government, requirements for the Board to keep government informed of significant matters and new requirements on capital, payments of dividends to Government, Telecom borrowings and new liability for tax..
The 1989 legislation fundamentally changed telecommunications structure, regulation and focus in Australia. Yet, fundamental as the changes were, they were only the first step on what is now a continuing path of change in telecommunications.
[72] Ibid, p. 39.
[73] Section 52(1) and (3) Telecommunications Act 1989. The word cadastre means an official register of property, with details of property boundaries, ownership, etc.
[74] Section 53, Telecommunications Act 1989.
[75] Sections 56-7 Telecommunications Act 1989.
[76] 1988 Statement, para 6.39.
[77] V. Fanning, Op. Cit., p. 42.
[78] Ibid.
[79] Interview J. Smith, Section 54 Telecommunications Act 1989.
[80] Sections 43(1) and (2) Telecommunications Act 1989.
[81] Section 46 Telecommunications Act 1989.
[82] Section 48 Telecommunications Act 1989.
[83] Section 47 Telecommunications Act 1989.
[84] 1988 Statement Paras 4.45 and 6.38.
[85] Ibid, para 6.39.
[86] Section 75 Telecommunications Act 1989.
[87] Sections 87 and 88 Telecommunications Act 1989
[88] Section 52(2) and (4) Telecommunications Act 1989.
[89] Sections 71 and 75(3)(a) Telecommunications Act 1989.
[90] Value Added Services Class Licence, AUSTEL No. 2 of 1989, contained in Armstrong, 1990, pp 132-135,
[91] Section 4, Telecommunications Act 1989.
[92] Sections 72 and 75(3) Telecommunications Act 1989.
[93] Private Network Services Class Licence, AUSTEL No 4 of 1989, contained in Armstrong, 1990 Cit., pp 94-96.
[94] Sections 97-98, Telecommunications Act 1989.
[95] Section 101, Telecommunications Act 1989.
[96] Sections 18-24 Telecommunications Act 1989. For full discussion of AUSTEL's roles under the 1989 Act, see Ian Cunliffe, Op. Cit, Armstrong, 1990 p. 244.
[97] Ibid, p. 246.
[98] Ibid.
[99] Sections 31-32 Telecommunications Act 1989.
[100] Second Reading Speech of the Telecommunications Bill 1989, Australia House of Representatives, 13 April 1989, Debates, Weekly Hansard. p. 1622.
[101] Apart from the power of the Minister to notify AUSTEL of general Commonwealth policies (s. 28), the Minister could determine reserved services charges (s. 62), give directions on how AUSTEL was to perform its class licensing functions (s. 73) and how AUSTEL was to perform its technical regulation functions (s. 111). The Government could also pass regulations determining the boundaries of the network (s. 42) and determining the definition of primary communications carriage (s. 54).
[102] V. Fanning, Op. Cit., p. 40.
[103] Section 27, Australian Telecommunications Corporation Act 1989, required Telecom to ensure that, in view of the social importance of the standard telephone service, the service is reasonably accessible to all people in Australia on an equitable basis, wherever they reside or carry on business; and that the performance standards for the standard telephone service reasonably meet the social, industrial and commercial needs of the Australian community.
[104] Sections 32-33 Australian Telecommunications Corporation Act 1989.