Telecom bets both ways on regulation

By RICHARD BRADDELL

On the same day that Telecom tells the telecommunications inquiry there is no need for industry-specific regulation, its 80 per cent owned subsidiary AAPT will be arguing the reverse before an Australian inquiry.

Hearings on the New Zealand inquiry's preliminary recommendations begin at the Wellington Airport conference room this morning, with Telecom scheduled to appear first.

A key recommendation of the Hugh Fletcher-led inquiry is that an industry-specific regulator be created with powers similar to its Australian counterpart to designate specific services for regulation.

The inquiry virtually mirrors a review by Australia's Productivity Commission, which, three years after deregulation, is considering whether to move towards New Zealand's present reliance on generic competition law.

While Telecom has argued strenuously for the status quo, AAPT's written submission could well have been prepared by one of Telecom's competitors, given its robust support for industry-specific regulation.

"In addition to industry-specific legislation itself, there is also a need for industry-specific regulators whose expertise allows them to take prompt and effective action where necessary," says AAPT. "The current roles of the Australian Competition and Consumer Commission and the Australian Communications Authority should be maintained."

And while Telecom says commercial negotiations, such as the recent interconnection deal with Telstra Saturn, show that the market can find its own solutions, AAPT thinks differently.

It says industry self-regulation works well only when the participants have similar or non-conflicting interests and no incentive to obstruct the self-regulatory process.

"AAPT considers it vital that regulators continue to have the authority and the ability to oversee the competitive process and intervene where one firm or a number of firms are acting anti-competitively."

AAPT says its experience is that many access (interconnection) services from one carrier to another are provided "only reluctantly, and rarely, if ever, are they offered at cost-based prices ... The combination of market power and vertical integration, which characterises the suppliers of these services, removes the incentive for them to negotiate access on reasonable terms and conditions which would apply in a competitive market."

And while Telecom has argued against lowering the Commerce Act's test for misuse of a dominant position from requiring proof that the behaviour had the intended purpose to the Australian test of whether it had that effect, AAPT has no doubt that the Australian approach is correct.

It also argues that the Australian Competition and Consumer Commission should be given powers to issue "cease and desist" notices, possibly backed by financial penalties, when anti-competitive conduct is identified.

But while AAPT contends that Australia's regulatory environment has encouraged substantial investment, including its own, it does not consider it adequate to produce a market sufficiently competitive to allow for industry self-regulation.

In contrast to New Zealand, where residential local loop competition exists only in Wellington, Cable & Wireless Optus offers telephone services to 35 per cent of the market and other competitors, including Hutchison and AAPT itself, will soon offer wireless services.