I OVERVIEW

The TMT sectors in Australia are currently in the middle of several transitions, among the most significant of which is the transition to the wholesale-only, government-owned National Broadband Network (NBN), which will effectively replace Telstra’s legacy copper network. This will create a significant shift in the fixed telecommunications industry structure, as Australia moves to a structurally separated model focused on services-based competition.

Convergence within the TMT sectors continues to take place, with traditional broadcast media facing increasing competition from OTT, on-demand media providers that use broadband networks to deliver their content. However, as outlined below, Australia retains separate regulatory regimes for broadcasting and telecommunications (despite having a converged regulator in the form of the Australian Communications and Media Authority (ACMA)).

II REGULATION

i The regulators

The ACMA, established in 2005, is the converged regulator for the internet, broadcasting, telecommunications and radiocommunications sectors. The key responsibilities of the ACMA include:

  • a licensing and regulating telecommunications carriers, carriage service providers and content service providers;
  • b licensing and regulating radiofrequency spectrum;
  • c regulating television and radio broadcasting, including content regulation;
  • d regulating telecommunications and radiocommunications equipment; and
  • e regulating telephone and email marketing, and online content.

The structure and powers of the ACMA are set out in the Australian Communications and Media Authority Act 2005. The key pieces of legislation administered by the ACMA are:

  • a the Telecommunications Act 1997, which regulates carriage and content services;
  • b the Radiocommunications Act 1992, which regulates radiofrequency spectrum; and
  • c the Broadcasting Services Act 1992, which regulates television and radio industry structure and content.

The Australian Competition and Consumer Commission (ACCC) is responsible for access regulation in the telecommunications sector, and also oversees the telecommunications-specific anticompetitive conduct and consumer protection provisions within the Competition and Consumer Act 2010 (CCA).

The Department of Communications and the Arts is the government department responsible for developing policy relevant to the TMT sectors.

ii Regulated activities

A ‘carrier licence’ is required for owners of network units that are used to provide fixed, mobile or satellite services to the public. A ‘network unit’ includes line links (e.g., optical fibre, copper links) as well as radiocommunications transmitters and receivers (e.g., mobile telephony base stations, satellite-based facilities). The owner of the network unit must apply to the ACMA for a carrier licence. The application must be accompanied by a non-refundable application fee of A$2,122 (as of September 2017). The ACMA has 20 business days to make a decision in respect of issuing a carrier licence and must consult with the Attorney General’s Department. If no decision is made within 20 business days, the application is deemed to have been refused. Carriers must pay an annual licence fee to the ACMA comprising a fixed amount as well as a variable amount based on the carrier’s eligible revenue (being the gross sales revenue of the carrier and related entities, less any proscribed revenue and expense deductions).2 A carrier licence has no set duration, and remains in force until it is either surrendered by the licensee or cancelled by the ACMA.

No licence is required for entities that provide telecommunications services to the public without owning any network units. These entities are classified as ‘carriage service providers’ and must comply with a range of regulatory obligations, including wholesale access, interception and data retention obligations. A similar regime applies to entities providing content services to the public (e.g., pay-TV services) without owning any network units. Such entities are classified as ‘content service providers’ and are subject to certain regulatory obligations without requiring a licence.

Carriage service providers and content service providers that provide standard telephone services, public mobile telecommunications services or internet access services must also join the Telecommunications Industry Ombudsman (TIO) scheme. In addition, providers of standard telephone services must provide access to local, national and international calls, emergency service numbers, operator-assisted and directory services, and itemised billing (including itemised local calls on request).

Since April 2015, pre-selection obligations only apply to providers of fixed-line telephony services over the legacy PSTN or integrated services digital network networks, rather than all fixed-line telephony providers. These changes were effected through the Telecommunications Legislation Amendment (Deregulation) Act 2015, which more broadly seeks to remove outdated regulation of the telecommunications sector.

There are three types of radiocommunications licences overseen by the ACMA. A ‘spectrum licence’ is required for the use of a particular radiofrequency band within a particular geographic area. The spectrum licensing regime is being reviewed by the ACMA (see Section IV). Currently, spectrum licences are allocated using a market-based approach, typically an auction, and are issued for up to 15 years. Spectrum licences are technology-neutral, allowing licensees to operate any type of equipment for any purpose as long as they comply with licence conditions and certain technical standards.

An ‘apparatus licence’ is an individual licence required for the operation of radiocommunications devices under specific technical conditions of use relating to such matters as frequency, power and geographic area. There are a number of apparatus licence types, including, inter alia, for aircraft, broadcasting, datacasting, defence and scientific transmitters as well as defence, fixed and space receivers.

The operation of certain radiocommunications devices is regulated through a ‘class licence’ (rather than an individual apparatus licence). Devices that the ACMA currently authorises through a class licence include satellite communications equipment and Wi-Fi devices.

iii Ownership and market access restrictions

There are two key restrictions on cross-ownership of media companies. First, a person cannot be in a position to exercise control of more than two of the three media platforms (commercial television, commercial radio and newspapers) in a particular radio licence area (the ‘two-out-of-three rule’). Second, a cross-media merger or acquisition cannot result in the number of independent media operators falling below five ‘voices’ in metropolitan radio licence areas and four ‘voices’ in regional radio licence areas (the ‘four/five rule’). In addition, a person cannot be in a position to exercise control of commercial television broadcast licences whose total licence area populations are greater than 75 per cent of the Australian population (the ‘75 per cent reach rule’).

However, these restrictions are due to change as Parliament is expected to pass legislation this year that will repeal both the ‘two-out-of-three rule’ and the 75 per cent reach rule, as discussed in Section VII.

Foreign ownership restrictions depend on the specific sector in which the target entity is located. For investments in the media sector, the Foreign Investment Review Board must be notified if a ‘foreign person’ seeks to acquire 5 per cent or more of an Australian media business, regardless of value. A ‘foreign person’ is defined as an individual who is not ordinarily a resident in Australia or a corporation where one or more foreign persons hold a combined total of 20 per cent or more of the issued shares, units or voting power.

For foreign investments in the telecommunications sector, the Foreign Investment Review Board must be notified if a foreign person (or several foreign people) acquires a ‘substantial interest’ in an Australian corporation whose assets exceed A$252 million (indexed annually). A ‘substantial interest’ will have been acquired if a single foreign person holds 20 per cent or more, or several foreign persons hold 40 per cent or more, of the issued shares, units or voting power of the target corporation.

The foreign investment notification rules for the media and telecommunications sectors apply even to investors from countries that have free trade agreements with Australia, such as Chile, China, Japan, New Zealand, South Korea and the United States.

iv Transfers of control and assignments

A carrier licence cannot be assigned or transferred, since it is granted to a particular entity. Spectrum can be freely traded in the form of spectrum trading units (STUs), which refer to a particular block of bandwidth within a given geographic area. A spectrum licensee can transfer some or all of the STUs within the scope of its licence. This means that spectrum licences can effectively be divided or amalgamated to respond to market-based needs.

Apparatus licences are also generally transferrable. An application must be lodged to the ACMA, signed by both the original licensee and the proposed new licensee. The ACMA has the power to declare that particular types of apparatus licence are not transferrable or that, in specified circumstances, an apparatus licence is not transferrable.

Mergers and acquisitions in the TMT sectors are subject to the general merger control regime overseen by the ACCC. There is no requirement for parties to a merger to notify the ACCC. However, under Section 50 of the CCA, the ACCC (or a third party) can take court action if a merger or acquisition would have the effect or likely effect of substantially lessening competition in any market.

Accordingly, merger parties may apply to the ACCC for formal or informal clearance of a merger. An acquiring party may apply for formal clearance before the merger takes place. The ACCC ordinarily has 40 business days to review a merger, which can be extended by a further 20 business days in complex cases or if there are special circumstances. If the ACCC approves the merger, the ACCC or a third party cannot take any action in respect of the merger under Section 50 of the CCA. The formal clearance regime has never been used since it was introduced in 2007. An ACCC decision not to grant formal clearance to a merger can be appealed to the Australian Competition Tribunal (ACT).

Informal clearance similarly allows the ACCC to review a merger and provides an indication of the ACCC’s views on whether the merger is likely to breach Section 50 of the CCA. However, informal clearance does not prevent the ACCC or a third party from taking action against the merger parties at a later date. There are no formal time frames within which the ACCC must provide informal clearance; however, the indicative time frame for this process is six to eight weeks.

Parties can also seek authorisation from the ACT for a merger that would otherwise contravene Section 50 of the CCA. Authorisation must be sought before the merger goes ahead. The ACT must be satisfied that the merger is likely to result in such benefit to the public that it should be allowed. The time frame for this process is ordinarily three months, although the ACT may extend the review period by a further three months if required.

III TELECOMMUNICATIONS AND INTERNET ACCESS

i Internet and internet protocol regulation

The ACMA considers providers of ‘managed’ VoIP services to be carriage service providers. This is the same regulatory category that mobile and fixed telephony providers sit within, and involves a range of regulatory obligations, including membership of the TIO scheme, consumer protection obligations, obligations to comply with the numbering plan and provide number portability, and lawful access and interception obligations.

Moreover, VoIP services that allow users to make calls to and receive calls from traditional PSTN telephony services are treated as ‘standard telephone services’. This entails certain additional obligations, such as providing operator and directory assistance services, access to emergency call services, access to the National Relay Service and itemised billing.

OTT VoIP services (provided over an existing carriage service), as well as OTT messaging services, are not subject to the same degree of regulation. The Department of Communications and the Arts or the ACMA do not currently have any definitive plans to regulate OTT IP-based services.

ii Universal service

A universal service regime was created by the Telecommunications (Consumer Protection and Service Standards) Act 1999. The regime requires Telstra, which has been designated as the default universal service provider, to ensure that standard telephone services and payphones are reasonably accessible to all Australians on an equitable basis. The supply of standard telephone services under the universal service obligation is subject to a range of minimum performance standards and benchmarks, including maximum periods for connecting a new service and for rectifying a fault.

The statutory universal service obligation is implemented through the Telstra Universal Service Obligation Performance (TUSOP) Agreement, entered into between the government and Telstra in July 2012. The TUSOP Agreement lasts for a period of 20 years and involves the government paying Telstra A$253 million per annum for the supply of standard telephone services and A$44 million per annum for the supply, installation and maintenance of payphones under the universal service obligation.

The costs of the universal service regime are funded through the Telecommunications Industry Levy, which is imposed on all carriers with eligible revenue in excess of A$25 million. The universal service regime has been overseen by the Department of Communications and the Arts since 1 July 2015. It was previously administered by the Telecommunications Universal Service Management Agency.

The government does not directly subsidise the construction of broadband infrastructure or the use of retail broadband services. However, in 2009, the government set up a state-owned corporation, NBN Co (since renamed nbn) to design, build and operate a wholesale-only next-generation NBN. Currently, nbn relies on a mixture of government funding and funding from banks and financial markets, and earns revenue primarily by selling wholesale (Layer 2 bitstream) access to its network to retail telecommunications operators.

According to the government’s Telecommunications Infrastructure in New Developments Policy (issued in March 2015), nbn has an ‘infrastructure provider of last resort’ (IPOLR) obligation in relation to new property developments that are within its fixed network footprint (or that will be within the next 12 months), or where the development has 100 lots or more. The IPOLR obligation requires nbn to roll out high-speed broadband infrastructure to these developments on request from the developer.

On 22 October 2015, the Regional Telecommunications Independent Review Committee (RTIRC) released its final report. The RTIRC was established by the government to review the adequacy of telecommunications services in regional, rural and remote parts of Australia. The final report made a series of recommendations, including a proposal to reform the universal service regime and to provide subsidies for nbn’s non-commercial fixed wireless and satellite services through a new consumer communication fund.

Following the RTIRC, the government requested the Productivity Commission hold an inquiry into the future direction of the universal service obligation, the final report of which was released in June 2017. The report provides a range of recommendations regarding the future of universal access to a minimum level of retail telecommunication services, with its key findings including that the universal service obligation should be wound up by 2020; broadband via the NBN and mobile networks will increasingly be the main medium for voice services; and to the extent that there is any remaining availability, accessibility or affordability gaps, these should be addressed by specific government programmes rather than by way of an industry levy.

In connection with the release of the Productivity Commission’s report, in June 2017, the government also introduced into Parliament the Telecommunications Reform Package (TRP). The TRP includes the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017, which aims to establish statutory infrastructure provider (SIP) obligations to ensure that all Australians have access to a high-speed broadband network, with nbn becoming the default SIP; clarify the wholesale-only rules that apply to high speed broadband networks; and enforce functional separation for other wholesale and retail carriers.

Additionally, the TRP proposes to establish the Regional Broadband Scheme (RBS) via the Telecommunications (Regional Broadband Scheme) Charge Bill 2017. The RBS is intended to provide sustainable industry funding for the loss-making fixed wireless and satellite networks in regional Australia that are owned by nbn. This funding, which is expected to amount to A$9.8 billion over 30 years, will rely 95 per cent on internal cross-subsidies within nbn, with the remaining 5 per cent paid for by competing nbn-comparable wholesale broadband networks. Both the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017 and the Telecommunications (Regional Broadband Scheme) Charge Bill 2017 are currently before the House of Representatives.

The government (in partnership with the state and territory governments) has also invested in the improvement of mobile coverage in remote and regional Australia through its Mobile Black Spot Programme, launched in June 2015. Round 1 of the Programme, currently in implementation, will deliver 499 new or upgraded mobile base stations in areas of problematic coverage. Round 2 of the Programme will deliver a further 266 new and upgraded mobile base stations at locations that were announced in December 2016.

iii Restrictions on the provision of service

There is currently no price regulation of retail telecommunications services. On 18 March 2015, the Minister of Communications revoked retail price control arrangements that applied to Telstra’s fixed-line voice services. However, the Minister retains the power to reintroduce retail price regulation at a future date.

Wholesale access regulation is effected through the telecommunications-specific access regime in Part XIC of the CCA. The ACCC has the power to ‘declare’ a listed carriage service or a service that facilitates the supply of a listed carriage service. Once a service is ‘declared’ by the ACCC, all providers of that service are subject to a range of standard access obligations. These include an obligation to supply the service on request (with certain exceptions) and to take all reasonable steps to ensure that the technical and operational quality of the service (and of fault detection, handling and rectification) is equivalent to that which the access provider provides to itself.

The telecommunications services ‘declared’ by the ACCC include, among others, fixed origination and termination, mobile termination, unconditioned local loop service, line sharing service, wholesale line rental, wholesale ADSL service and domestic transmission capacity service. As mentioned in Section VI.ii, the ACCC also commenced an inquiry in September 2016 into whether to declare wholesale domestic mobile roaming services. After engaging in public consultation on this issue, the ACCC released a draft decision in May 2017 proposing not to declare such a service. Subsequently, Vodafone commenced proceedings in the Federal Court seeking review of the ACCC’s conduct in relation to the inquiry. Following an initial directions hearing at which Telstra successfully applied to be joined as a respondent and Optus successfully applied to be an intervener, the Federal Court commenced the substantive hearing of Vodafone’s application on 27 September 2017. In the meantime, the ACCC has indicated that it still intends to release its final report on the issue in mid to late October 2017 notwithstanding the progress of Vodafone’s application to the Federal Court.

The NBN, which is a wholesale-only network, is subject to a slightly different set of access obligations. The network operator, nbn, has an obligation to supply any declared services on request to an access seeker, and to not discriminate between access seekers in doing so (with certain exceptions).

There is no ‘net neutrality’-style regulation in Australia that prohibits carriage service providers from favouring or excluding certain content, applications, services or devices.

The Spam Act 2003, administered by the ACMA, makes it illegal to send commercial electronic messages with an Australian link without the express or inferred consent of the recipient. Electronic messages include emails, instant messages and messages sent using the SMS and MMS services. Commercial electronic messages must also contain a functional unsubscribe mechanism and accurate information about who authorised the sending of the message. Exemptions from these rules apply for purely factual messages, as well as messages from government bodies, registered political parties, registered charities and educational institutions (sent to current and past students and their households).

In addition, the ACMA administers a Do Not Call Register, designed to prevent unsolicited telemarketing calls being made to fixed and mobile telephone numbers as well as marketing faxes. Users can register their telephone or fax number on the Do Not Call Register for free. Once a number is registered, it is prohibited to make unsolicited telemarketing calls or send marketing faxes to that number. Exemptions apply for public interest calls and faxes, including from government bodies, registered political parties, registered charities, educational institutions and political candidates.

iv Security

Lawful access and interception is governed by the Telecommunications (Interception and Access) Act 1979. Law enforcement agencies have the power to intercept telecommunications provided that they obtain a warrant from an eligible judge or member of the Administrative Appeals Tribunal. The Australian Security Intelligence Organisation (ASIO) only requires a warrant from the Attorney General to engage in the same activities. The interception regime is technology-neutral and applies to voice calls, faxes, SMS and MMS messages and IP-based communications (including email).

Carriers and carriage service providers are obliged to provide and maintain facilities enabling them to execute interception warrants. Carriers and carriage service providers must also lodge annual interception capability plans with the ACMA and the Attorney General’s Department. The costs of maintaining interception capability must be covered by carriers and carriage service providers, even though the requesting agencies pay for the costs of accessing the intercepted communications.

Australia acceded to the Council of Europe Convention on Cybercrime in March 2013. To implement its obligations under the Convention, a number of amendments were made to the existing legislation. These amendments allow law enforcement agencies and ASIO to issue notices to carriers that require them to store communications (including the content of communications) that assist in a specified domestic or foreign criminal or national security investigation. Unlike interception requests, these ‘preservation notices’ do not require a warrant. However, the stored communications can only be accessed through a warrant issued by a judge or member of the Australian Appeals Tribunal.

In addition, carriers and carriage service providers are now also subject to a mandatory metadata retention regime. This requires them to retain, for a period of two years, metadata relating to the communications of their subscribers (e.g., the phone numbers of the parties to a call or message, the time and duration of a call, the email address of the sender and recipient, and the time the email message was sent). The regime does not require retention of the content of a communication, nor of web-browsing history.

Personal information is regulated through the Privacy Act 1988 and the Australian Privacy Principles (APPs), which came into force in March 2014. The APPs apply to both government and private entities. In particular, the APPs require that, before an entity discloses personal information overseas, it must take reasonable steps to ensure that the recipient of the personal information does not breach the APPs (e.g., through a contractual obligation). From 22 February 2018, APP entities will be required under the Privacy Act 1988 to notify the Privacy Commissioner and affected individuals of eligible data breaches in respect of personal information held by the APP entity that will likely result in serious harm to the affected individuals.

In addition, Part 13 of the Telecommunications Act 1997 requires carriers, carriage service providers, number database operators and emergency service operators to protect the confidentiality of certain information. This includes the content of communications that have been, or are being, carried by carriers or carriage service providers, as well as the affairs or personal particulars of other persons. Disclosure of such communications or information is permitted only in certain circumstances, such as where authorised by law enforcement agencies or where reasonably necessary to prevent threats to life and health.

Compliance with both the Privacy Act 1988 and Part 13 of the Telecommunications Act 1997 is overseen by the Office of the Australian Information Commissioner.

IV SPECTRUM POLICY

i Development

The government is in the process of overhauling the current spectrum management system to replace it with a simplified singular licensing scheme. This aligns with the government’s wider policy of deregulation.

In August 2015, the government announced that it will implement the key recommendations of a Spectrum Review Report undertaken by the Department of Communications and the Arts and the ACMA. The Report found that existing spectrum management arrangements were slow, rigid, administratively cumbersome and unnecessarily costly for users. In May 2017, the government released an exposure draft of the Radiocommunications Bill 2017. The Department of Communications and the Arts is currently considering submissions to the consultation package and exposure draft. Spectrum pricing, including for Commonwealth-held spectrum, is also being considered separately to the Radiocommunications Bill 2017.

The government has noted that, to a large extent, the proposed reforms aim to free up opportunities for spectrum users.

ii Flexible spectrum use

Currently, three types of licences are available under the Radiocommunications Act 1992: spectrum licences, apparatus licences and class licences. The existing licensing schemes are complex and quite rigid. This creates difficulty obtaining, transferring and trading licences.

The proposed Radiocommunications Bill 2017 would introduce a single licensing system that is flexible and simple. The new licensing scheme will encompass core conditions including the relevant part of the spectrum, geographic information and payment of any applicable charges (including taxes). The proposed Radiocommunications Bill 2017 will integrate broadcasting spectrum into the general spectrum management framework.

A secondary market for spectrum will be encouraged, and assignment, sharing and subdivision will be allowed (subject to any licence restrictions). However, current class licences will not be incorporated into the new licensing system, meaning it may take time for a market to develop as old licences expire. The new licences will be issued for up to 20 years (current licences are limited to 15 years).

Under the new regime, the ACMA will retain legislative power to set licence conditions, subject to a broader set of guiding objectives, so that licences can be tailored to the needs of individual licence holders, accommodate new technologies and be re-purposed when they are transferred. To encourage spectrum sharing, the ACMA will be permitted to issue licences or make spectrum authorisations within parts of spectrum that have already been licensed or subject to an authorisation (provided arrangements are in place to manage interference). Licensees will also be able to authorise third parties to operate devices under their licences.

One of the purposes of this simplified licence regime is to encourage spectrum users to view spectrum rights as a form of property that is able to be regularly traded or leased. The Spectrum Review Report found that encouraging a market for spectrum rights ensures that spectrum is allocated efficiently, and may be applied to a variety of uses as demand requires. It also reduces the costs of regulatory intervention.

iii Broadband and next-generation mobile spectrum use

The ACMA has identified meeting unprecedented growth in demand for mobile broadband and next generation services as a priority for the next decade, and is working to formulate a new mobile broadband plan. In its five-year spectrum outlook for 2015 to 2019, released in September 2015, the ACMA noted that its studies indicate that Australia has sufficient spectrum available for mobile broadband services in the short to medium term. The ACMA’s spectrum outlook also acknowledges that, when responding to demand for mobile broadband spectrum in the longer term, it will also be important to take into account the needs of incumbent services, national safety and security obligations, and passive and sensing uses of spectrum. In addition, the ACMA issued the Mobile Broadband Strategy in February 2016, setting out a series of steps to address spectrum shortages created by growing demand for mobile broadband in the long term.

Following this, the ACMA released the ‘Future use of the 1.5GHz and 3.6GHz bands’ discussion paper in October 2016. This was done to seek industry feedback on the increasing demand for mobile broadband services in those bands, largely in anticipation of the future introduction of 5G mobile technology. In August 2017, the ACMA held a further consultation process on the 3.6GHz band on the basis that it has been identified to be the most favoured spectrum band for 5G mobile broadband. Other issues, such as nbn’s use of the 3.5GHz band for fixed mobile, have also been identified by some mobile carriers as potential roadblocks for future 5G deployment.

Separately, in September 2016, the ACCC commenced a market study on the communications sector that will consider existing or emerging competition and consumer issues (Communications Sector Market Study). The Communications Sector Market Study states that the ACCC expects the three major mobile network operators (Telstra, Optus and Vodafone) to begin to roll out 5G services by around 2020, and noted that 5G networks will likely use higher frequency spectrum than 4G (i.e., in the 3.4GHz to 3.7GHz band). A stakeholder forum was held in July 2017, and the ACCC’s draft report on the Communications Sector Market Study is due in October 2017.

iv Spectrum auctions and fees

Currently, the ACMA issues spectrum licences through auction, tender or price negotiation processes. The most recent spectrum auction was completed in April 2017, and concerned the 700MHz band. The spectrum that was auctioned is mostly expected to be used for 4G LTE, and is discussed in Section VI.

The ACMA maintains on its website a list of spectrum licences that are due to expire in the next 18 months, with details about whether they will be eligible for reissue. In 2012, the then-Minister for Broadband, Communications and the Digital Economy made a ‘class of services’ determination that it is in the public interest to reissue licences to incumbent licensees operating mobile voice and data communications services, wireless broadband services and satellite services in certain bands. If these licensees can prove that they have used the spectrum to provide a relevant service, the ACMA will offer the licence for reissue without offering the spectrum at auction.

The Spectrum Review Report expressed concern that under the current model, spectrum prices may not always reflect the true value of spectrum or the way that value changes over time. The Report noted that if the legislative changes it recommended were to be introduced, the prices for spectrum would need to be transparently reviewed to ensure they remained appropriate, and suggested that the ACMA might consider opportunity cost pricing or other forms of administered-incentive pricing.

The Spectrum Review Report also recommended that pricing and taxation arrangements for licences should be consolidated under the new single-licence system. Currently, different licences are subject to different charges, taxes and fees. For instance, class licences are not associated with any fees, while apparatus licences incur a cost recovery charge plus a licence fee that differs depending on whether it is a receiver or a transmitter licence. The recommendations of the Spectrum Review Report have since been implemented within the proposed Radiocommunications Bill 2017.

V MEDIA

i Restrictions on the provision of service

The ACMA is responsible for administering the Australian Content Standard and Television Program Standard 23 – Australian Content in Advertising, which applies to commercial free-to-air television licence holders. These standards do not apply to cable television providers or online content distributors like VOD platforms.

The Australian Content Standard provides that 55 per cent of broadcast transmission between 6am and midnight must be Australian programming, with sub-quotas for drama, documentaries and children’s programmes. The Australian Content in Advertising standard requires that at least 80 per cent of advertising time be used for Australian-produced advertisements.

For radio, under the Commercial Radio Code of Practice and Guidelines 2017, a minimum amount of Australian music content (between 5 to 25 per cent depending on the type of content) is required to be broadcast by commercial radio licensees between 6am and midnight each day. Certain formats of service, such as open-line, news, talk and sport content, are excluded from this requirement. Additionally, radio broadcasters must disclose commercial or other arrangements, such as sponsorships, that could affect reporting of current affairs under the Broadcasting Services (Commercial Radio Current Affairs Disclosure) Standard 2012.

The ACMA also administers the Classification (Publications, Films and Computer Games) Act 1995, and sets Guidelines for Classification of Films and Computer Games that are used by the Classification Board to classify content. Content is assessed based on six classifiable elements and assigned a rating to reflect its likely impact on different viewers. Although technically some online content is considered classifiable, historically classification obligations are not enforced against online providers.

An amendment to the Classification (Publications, Films and Computer Games) Act 1995 was enacted in September 2014 that allowed classification bodies to authorise the use of automated classification tools for certain content. This makes obtaining a classification significantly cheaper and easier. When this amendment was being considered, legislators expressed the hope that this would lead to increased classification rates for apps and online content.

The Advertising Standards Bureau administers several industry and target audience-specific codes of practice (such as the Commercial Radio Code of Practice and Guidelines 2017 and the Commercial Television Industry Code of Practice 2015), including advertising codes applicable to children, food and beverages and environmental claims.

ii Internet-delivered video content

In the past few years, traditional broadcasters have been launching online services including catch-up television and VOD offerings. These services complement rather than replace free-to-air broadcasts, so there is minimal disadvantage to consumers without internet access.

A Communications Sector Market Study’s issues paper released in September 2016 identified the popularity of streamed video content as a significant driver of demand for data services, and flags this as a factor for consideration when assessing the need and incentive for investment to improve data availability. The issues paper noted that video accounted for around 69 per cent of all internet traffic in Australia in 2015, and is expected to increase to 82 per cent by 2020. New and emerging applications, including ultra HD video (4K and 8K), 360 video or augmented or virtual reality games, are also expected to increase in popularity in Australia, placing further constraints on data, although it is expected that advanced video compression techniques may provide some relief.

Online content is subject to regulation under Schedules 5 and 7 of the Broadcasting Services Act 1992. This is a light-touch regime compared with the content and classification restrictions imposed on traditional broadcasters discussed above. Responsibility for administering online content regulation switched from the ACMA to the newly created Office of the Children’s eSafety Commissioner on 1 July 2015. The Commissioner has the power to investigate complaints about online content and order that prohibited content be taken down if it is hosted in Australia. Content is determined to be ‘prohibited’ if it would be refused classification or classified as X18+ under the content classification regime.

As noted earlier, there is no net neutrality regulation in Australia, meaning that internet service providers are able to reach arrangements that allow them to control and be compensated for content transmitted over their networks.

VI THE YEAR IN REVIEW

i NBN

The rollout of the NBN continued in 2016 and 2017, with the number of NBN-activated premises increasing from 1.1 million in June 2016 to 2.4 million in June 2017, with 5.7 million premises ready for service.3 The rollout continues to make use of the ‘optimised multi-technology mix’ initially set out in the Minister of Communication’s statement of expectations to nbn of April 2014,4 and the updated statement of expectations to nbn on 24 August 2016.5 The multi-technology mix currently involves the use of FTTN, fibre-to-the-building (FTTB) and hybrid fibre coaxial (HFC) technologies alongside the initial fibre-to-the-premises, fixed wireless and satellite technologies envisaged in the original design of the NBN.

The multi-technology mix continues to develop, with nbn announcing in November 2016 that it will introduce FTTC technology, which is planned to serve 1 million premises by 2020, and that it has been trialling G.fast technology for the FTTC, FTTN and FTTB networks that have achieved speeds of between 500Mbps and 1Gbps in trials. In addition, nbn launched its second dedicated satellite, Sky Muster II, and retired the interim satellite service it had been offering up to February 2017.

On 27 May 2016, nbn submitted a proposed variation to its special access undertaking (SAU) to the ACCC. The SAU, accepted by the ACCC on 13 December 2013, applies to wholesale access to nbn’s network until 2040. The proposed SAU variation sought to give effect to the addition of FTTN, FTTB and HFC technologies to the NBN. After a consultation on the proposed variation, the ACCC released its initial decision to reject the variation on 28 March 2017. On 22 June 2017, nbn lodged a revised SAU variation that sought to address the ACCC’s initial concerns. Submissions on the ACCC’s consultation paper on the revised SAU variation have been lodged, with a decision from the ACCC due to follow towards the end of 2017.

On 2 September 2016, the ACCC issued a report on the commercial agreements between Telstra and nbn that involve Telstra providing a range of network services to nbn to expedite the rollout of the NBN. The ACCC was concerned that these agreements could provide Telstra with an advantage over other access seekers using the NBN, as Telstra could obtain greater insights into the NBN rollout. Accordingly, the ACCC continues to work with Telstra and nbn to ensure that arrangements are put in place to mitigate any competition issues arising from Telstra’s provision of network services to nbn. On 21 December 2016, the ACCC provided an update on the reporting initiatives of nbn and Telstra, announcing that Telstra has commenced reporting to the ACCC each quarter regarding its involvement in the HFC network, and with nbn reporting on potential competitive advantages that Telstra may have.

ii Regulatory activity by the ACCC

The ACCC issued several important regulatory instruments and commenced several regulatory inquiries during the course of the year:

  • a on 26 May 2017, the ACCC issued its final access determination regarding the terms of access to superfast broadband access services (SBAS) built before 2011. nbn, as well as non-nbn operators of superfast broadband networks built or extended after 2011, are already subject to access obligations and are therefore not covered by the scope of the ACCC’s SBAS final access determination; and
  • b on 4 May 2017, the ACCC released its draft decision to not declare a wholesale domestic mobile roaming service. This would have allowed mobile network operators to provide retail services (through roaming) in areas of Australia where they do not have their own network facilities. Vodafone is currently challenging the inquiry process before the Federal Court (the hearing for which commenced on 27 September 2017), with the ACCC set to release its final report in October 2017. The ACCC previously decided in 1998 and 2005 to not regulate access to wholesale domestic mobile roaming.
iii Mergers and acquisitions

Following its previous consolidations with M2 and Amcom, Vocus Communications purchased Nextgen in June 2016 for A$807 million, resulting in four major fixed-line telecommunication operators in Australia: Telstra, Optus, TPG and Vocus.

In December 2016, London-based data centre operator, Global Switch, was purchased by Chinese consortium Elegant Jubilee for A$4 billion. This has raised security concerns for the Australian government about Global Switch’s Australian subsidiary, Aldersgate Investments, which currently operates two high-security data centres in Sydney that hold classified government information. As a result of the acquisition, the government has decided to end outsourcing of sensitive data once the contract expires in 2020, and shift it back to government-controlled entities.

In April 2017, TPG Telecom purchased 2x10 megahertz of 700MHz spectrum for A$1.26 billion as part of an apparent bid to become Australia’s fourth mobile network operator. TPG Telecom plans to spend an additional A$600 million to roll out a mobile network to cover 80 per cent of the Australian population within three years, and will utilise its existing fibre network infrastructure to provide the backbone of its mobile network.

Finally, in August 2017, US-based broadcaster CBS has agreed to purchase Ten Network (including core channel Ten, digital channel One and digital platform Tenplay) after it was placed into voluntary receivership in June 2017. The purchase was approved by the creditors of Ten Network on 19 September 2017 but still remains subject to approval of the court and the Foreign Investment Review Board.

VII CONCLUSIONS AND OUTLOOK

The rollout of the NBN using a multi-technology mix is expected to continue over the coming years, and nbn’s target is for 8.7 million premises (reduced from the previous target of 9.1 million premises) to be capable of connecting to the network by 2018. This reduction is due to 200,000 fewer premises that are estimated in the planned footprint, and delays caused by the introduction of FTTC.

The internet of things (IoT) is also expected to develop further in Australia, with likely implications for a range of areas of regulation, including spectrum use, equipment standards, cybersecurity, and privacy and data protection. Regulatory frameworks and policy have not explicitly focused on IoT issues to date, but this is expected to be an area of future development in line with global trends. Programs, such as Adelaide’s Smart City initiative announced in 2017, will likely be the testbed for many of these IoT uses in Australia.

Several changes to the regulatory environment for TMT are expected to take place in the short to medium term. In December 2014, the government released its formal response to the recommendations of the Vertigan Panel, which was appointed to review the regulatory arrangements for the NBN.6 At the time, the government envisaged a three-stage regulatory reform process for the telecommunications sector to enhance competition, particularly in respect of high-speed broadband networks.

The first stage involved certain transitional measures implemented in 2015 and 2016, such as requiring the functional separation of the wholesale and retail arms of carriers owning superfast fixed-line broadband networks.

The second stage envisaged the establishment of a new telecommunications regulatory framework (intended to have applied from 1 January 2017), which would, among other things, require structural separation between the wholesale and retail businesses of new superfast fixed-line broadband networks and create competitively neutral arrangements for funding nbn’s non-commercial fixed wireless and satellite services. The proposed TRC, described in Section III, seeks to address this stage.

The third stage of the government’s response to the Vertigan Panel’s report involved the lead up to the privatisation of nbn, once the network is rolled out and fully operational, and a Productivity Commission review into privatisation has been completed and examined by the government.

Following the recommendations of the 2015 Harper Review, the government passed legislation on 15 August 2017 to amend Section 46 of the CCA, which prohibits misuse of market power economy-wide. The amendments to Section 46 prohibit conduct that has the purpose, effect or likely effect of substantially lessening competition in that market (replacing the current purpose-based test). The amendments introduce a degree of duplication with the telecommunications-specific anticompetitive conduct provisions in Part XIB of the CCA, which already include an effects-based test. While the original bill sought to remove this duplication by repealing Divisions 2 and 3 of Part XIB, the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 that passed through both Houses was modified to only amend and not repeal these divisions of Part XIB. Commencement of this new provision will not start until the Competition and Consumer Amendment (Competition Policy Review) Bill 2017 is passed and implemented. It is currently before the Senate.

The government has also proposed significant changes to media laws in the form of the Broadcasting Legislation Amendment (Broadcasting Reform) Bill 2017, which was introduced into Parliament on 15 June 2017. This Bill proposes to repeal the ‘two-out-of-three rule’ and the ‘75 per cent reach rule’ described in Section II.iii, which impose restrictions on media ownership. The proposed reforms would also increase local content requirements.

At the time of publication, the Broadcasting Legislation Amendment (Broadcasting Reform) Bill 2017 was before the Senate, with the Turnbull government reaching an agreement with independents for its successful passage through Parliament. While the unsuccessful bids for Network Ten by Bruce Gordon and Lachlan Murdoch were contingent on the passage of this legislation, it still remains to be seen to what extent these changes will in fact lead to the further consolidation of media ownership in Australia.

Angus Henderson

Webb Henderson

Angus Henderson has worked on communications regulatory, wholesale and commercial transactions over the past 25 years in Australia, Asia-Pacific, the Middle East and beyond. He has worked for leading telecommunications operators in the sector on some of the leading telecommunications, pay television and broadband deals during this time.

A large proportion of his practice is devoted to the development of competitive regulatory models in the telecommunications and broadcasting industries. He provides extensive advice on deregulation of communication markets to operators and regulators throughout Asia-Pacific and the Middle East on these matters.

In 2015 and 2012, Mr Henderson was named as ‘Telecommunications Lawyer of the Year (Sydney)’ by Best Lawyers. He is ranked in Band 1 by Chambers Asia Pacific 2017 in telecommunications in Australia. He is named as a ‘preeminent’ telecommunications lawyer by Doyles Guide 2017 and is also named as a ‘Leading Individual in TMT’ in The Legal 500 2017. He is also the co-editor of Communications Law and Policy in Australia.

Richard Dampney

Webb Henderson

Richard Dampney is a senior associate at Webb Henderson who advises on commercial and regulatory issues with a focus on the telecommunications, media and technology sector and a background in commercial litigation.

Richard advises large global telecommunications companies across Australia, Asia-Pacific and the Middle East, including nbn, and has extensive experience with commercial negotiations and in contract law. Most recently, Richard has acted as a key adviser on the negotiation of nbn’s wholesale broadband agreement, which is the primary agreement under which nbn supplies products and services to its wholesale customers.

Prior to joining Webb Henderson, Richard worked for Ashurst where he advised clients in a diverse range of industries including the technology sector, financial services and resources.

Richard holds a bachelor of laws with first class honours from the University of Sydney as well as a bachelor of arts (languages) with first class honours.

Stephen coudounaris

Webb Henderson

Stephen Coudounaris is a lawyer at Webb Henderson who has worked on a number of industry-shaping projects for Australian and international clients in the telecommunications, media and technology sectors. Prior to this, he worked on large-scale litigation matters, including defending high-profile class actions and assisting in multi-billion acquisitions.

Stephen now works with large private sector international and domestic TMT operators. His experience includes assisting with regulatory submissions on IoT regulations in the UAE, advising on competition issues in the telecommunications industry, assisting with advice on the regulatory pricing model of superfast broadband in New Zealand and advising on national wholesale telecommunications sector supply agreements. He also advises on the legal and technical aspects of content licensing agreements with OTT providers.

Stephen holds a bachelor of commerce from the University of Sydney and a juris doctor (distinction) from the University of New South Wales, having also studied at Columbia University in New York.

Webb Henderson

Level 18, 420 George St

Sydney NSW 2000

Australia

Tel: +61 2 8214 3500

angus.henderson@webbhenderson.com

richard.dampney@webbhenderson.com

stephen.coudounaris@webbhenderson.com

www.webbhenderson.com

1 Angus Henderson is a partner, Richard Dampney is a senior associate and Stephen Coudounaris is a lawyer at Webb Henderson.

2 See Part 5 of the Telecommunications (Eligible Revenue) Determination 2015.

3 nbn, ‘nbn Corporate Plan 2018 – 2021’, 31 August 2017, http://www.nbnco.com.au/content/dam/nbnco2/documents/Corporate-Plan-2018-2021.pdf.

4 Letter from Malcolm Turnbull (Minister of Communications) and Mathias Cormann (Minister of Finance) to Dr Ziggy Switkowski (Executive Chairman of NBN Co), government Expectations, 8 April 2014, www.nbnco.com.au/content/dam/nbnco2/documents/soe-shareholder-minister-letter.pdf.

5 Letter from Mitch Fifield (Minister of Communications) and Mathias Cormann (Minister of Finance) to NBN Co, Statement of Expectations, 24 August 2016, http://www.nbnco.com.au/content/dam/nbnco2/documents/soe-shareholder-minister-letter.pdf.

6 Government, Telecommunications Regulatory and Structural Reform, December 2014,
www.communications.gov.au/sites/g/files/net301/f/Telecommunications_Regulatory_and_Structural_
Reform_Paper_-_11_December_....pdf.