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™ network. This is creating 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:

  1. licensing and regulating telecommunications carriers, carriage service providers and content service providers;
  2. licensing and regulating RF spectrum;
  3. regulating television and radio broadcasting, including content regulation;
  4. regulating telecommunications and radiocommunications equipment; and
  5. 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 the Telecommunications Act 1997, which regulates carriage and content services; the Radiocommunications Act 1992, which regulates RF spectrum; and 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 and copper links) as well as radiocommunications transmitters and receivers (e.g., mobile telephony base stations and 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 at September 2018). 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 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 RF 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). Following industry consultation, the ACMA has introduced the Radiocommunications (Intelligent Transport Systems) Class Licence 2017 to support intelligent transport systems (ITS), which will enable vehicle-to-vehicle, vehicle-to-person or vehicle-to-infrastructure communications through the use of complying wireless technologies and devices.3 Other 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 now three key restrictions on cross-ownership of media companies:

  1. the two-to-a-market radio rule, which prevents control of more than two commercial radio licences in the same licence area;
  2. the one-to-market TV rule, which prevents control of more than one commercial TV licence in the same licence area; and
  3. the number of voices rule, which prevents cross-media mergers or acquisitions that result in the number of independent media operations falling below five voices in metropolitan radio licence areas and four voices in regional radio licence areas (the four/five rule).

These restrictions on cross-ownership of media companies were watered down significantly by the Broadcasting Legislation Amendment (Broadcasting Reform) Act 2017. That legislation repealed, from 17 October 2017, the following key restrictions on media control and diversity rules that previously applied: the two out of three rule, which prevented a person from being in a position to exercise control of more than two of the three media platforms (commercial television, commercial radio and newspapers) in the same licence area; and the 75 per cent reach rule, which prevented a person from being 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.

Foreign ownership restrictions depend on the specific sector in which the target entity is located. 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.

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.

In addition, from September 2018, a foreign person with company interests of 2.5 per cent or more in an Australian media company is required to notify the ACMA of its interests within 30 days.4 The ACMA includes details of these notifications in a publicly available register of foreign owners of media assets.

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 and be 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. Under this regime, there is no requirement for parties to a merger to notify the ACCC before completing a merger. However, under Section 50 of the CCA, the ACCC (or a third party) can investigate a merger and take court action if a merger or acquisition would have the effect or likely effect of substantially lessening competition in any market. If the parties to a merger want to obtain greater certainty in relation to the competition risks of the merger, there are two optional pre-merger approval processes that a party may apply for:5

  1. merger authorisations: the ACCC will grant a merger authorisation if either the proposed acquisition would not be likely to substantially lessen competition, or the likely public benefit from the proposed acquisition outweighs the likely public detriment. If the ACCC grants a merger authorisation, the ACCC or a third party cannot take any action in respect of the merger under Section 50 of the CCA. The ACCC must make a determination within 90 days (unless that time period is extended with the consent of the applicant). Failure by the ACCC to make a determination within the 90-day time limit is deemed as a refusal to grant authorisation.
  2. informal merger review: the ACCC provides an indication of its views on whether a merger is likely to breach Section 50 of the CCA. While an informal merger clearance may provide merger parties with a significant level of comfort regarding the ACCC's position, it does not prevent the ACCC or a third party from taking action against the merger parties at a later date under Section 50 of the CCA. 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.

In undertaking a media merger assessment, the ACCC will consider the impact of the proposed merger on competition and media diversity, access to key content, the impact of technological change, two-sided markets and network effects, bundling and foreclosure, and minority shareholdings. An applicant or person who has a sufficient interest in a merger authorisation may appeal an ACCC determination to the Australian Competition Tribunal.

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 and 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 USO 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 USO 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 USO.

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 (known as nbn) to design, build and operate a wholesale-only next-generation network. Currently, nbn relies on government funding, 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 a 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 release of the RTIRC's final report, the government requested the Productivity Commission to hold an inquiry into the future direction of the USO, 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 the fact that the USO should be wound up by 2020; broadband via the nbn™ network 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 December 2017, the government released its response to the Productivity Commission's report outlining its intention to establish a universal service guarantee (USG). The USG will provide all Australian premises (regardless of their location) with access to both voice and broadband services delivered on a commercial basis by the market in the first instance, or targeted government measures where warranted.6 The USG will leverage the nbn™ network, with access to the network underpinned by the statutory infrastructure provider legislation currently before Parliament. The government established a USO Taskforce responsible for developing delivery options for the USG, including examining the feasibility and cost implications of providing alternative means for providing voice services to premises in nbn's satellite footprint, the potential impact on nbn costs and its network design if premises serviced by Telstra under the USO migrate to the nbn™ network, and where and when it may be appropriate for Telstra to reduce the number of payphones provided under the USO.

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 a 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 have a 95 per cent reliance 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 Senate.

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, which was launched in June 2015. The mobile black spot programme is over halfway complete, with 572 base stations activated (as at 30 June 2018), and all 867 base stations funded under the first three rounds of the programme are expected to be operational by 30 June 2019. The government announced in June 2018 that it will invest a further A$25 million towards the mobile black spot programme.

In May 2018, the Department for Communications and the Arts appointed an independent committee to undertake a review of regional telecommunication services (2018 Regional Telecommunications Review), as is required every three years by Part 9B of the Telecommunications (Consumer Protection and Service Standards) Act 1999. The 2018 Regional Telecommunications Review will consider how rural Australians can maximise the economic and social benefits that modern telecommunication services can provide and undertake an analysis of the coverage achieved under the mobile black spot programme.7 The committee was expected to report to the Minister for Regional Communications by 30 September 2018. However, as at November 2018 there has been no public announcement regarding the outcome of this Review.

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) that 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.

On 31 August 2018, the ACCC announced an inquiry seeking views on the future of the existing declarations, due to expire on 31 July 2019, in respect of the unconditioned local loop service, line sharing service, wholesale line rental, PSTN originating access (OA) and PSTN terminating access (TA). The ACCC is considering whether these declarations should be remade, further extended, revoked, varied, allowed to expire, or extended and then allowed to expire. Consultation closed on 12 October 2018.

In October 2017, the ACCC decided not to declare wholesale domestic mobile roaming services. Legal proceedings commenced by Vodafone challenging aspects of the conduct of the inquiry were dismissed by the Federal Court on 21 December 2017.

The nbn™ network, which is a wholesale-only network, is subject to a slightly different set of access obligations. As the network operator, nbn has an obligation to supply any declared services that relate to nbn on request to an access seeker (with limited exceptions), and to not discriminate between access seekers in doing so. In November 2017, the ACCC announced a public inquiry into nbn's wholesale service standard levels. The inquiry is still ongoing; however, the ACCC accepted a court-enforceable undertaking (on 11 September 2018) by nbn to make changes to its wholesale service level commitments and associated rebates.

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).8

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.9

The ACMA also administers a number of other standards and codes of practice, including the Telecommunications Consumer Protections Code, which set out various specific requirements that carriage service providers and other entities are required to comply with (as applicable). On 1 July 2018, the ACMA introduced new complaints handling rules, which were designed to ensure carriage service providers effectively manage complaints in relation to consumer problems with nbn services.10

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 capabilities 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.

From 18 September 2018, following the introduction of the Telecommunications and Other Legislation Amendment Act 2017, all carriers, carriage service providers and carriage service intermediaries are legally required to do their best to protect telecommunications networks and facilities owned, operated or used by the carrier or provider from unauthorised interference or unauthorised access to ensure the confidentiality of communications carried on, and of information contained on, telecommunications networks or facilities; and the availability and integrity of telecommunications networks and facilities. For carriers and carriage service providers, this obligation includes a requirement to maintain competent supervision of, and effective control over, telecommunication networks and facilities owned or operated by them. In addition, carriers and carriage service providers are required to notify the Communications Access Co-ordinator of proposed changes to their networks and services that could have a material adverse impact on their ability to comply with these new obligations.

On 20 September 2018, the government introduced the Draft Exposure Telecommunications and Other Legislation Amendment (Assistance and Access) Bill 2018 in Parliament. Under that Bill, domestic and foreign designated communication providers would be required to provide assistance (including, where required, to develop a capability to provide the assistance requested) to law enforcement and security agencies to access certain communications.

In addition, carriers and carriage service providers are now also subject to a mandatory metadata retention regime.11 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 or 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 are required to notify the Office of the Australian Information Commissioner (OAIC) and affected individuals of eligible data breaches12 in respect of personal information.13 Under the Notifiable Data Breaches Scheme, APP entities can undertake remedial action to reduce the risk of serious harm of a data breach and the associated obligation to notify affected individuals (although the OAIC will still need to be notified).14 There are also a range of exceptions to the notification obligation, including where:

  1. the data breach has been reported by another entity holding that personal information;
  2. notification would likely prejudice an enforcement-related activity;
  3. the requirement to notify would be inconsistent with the secrecy provisions; or
  4. the Commissioner has declared that an entity does not need to provide such a notification.15

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 OAIC.

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 the 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, with the Department of Communications and the Arts considering submissions to the consultation package and exposure draft bill.

Spectrum pricing, including for Commonwealth-held spectrum, was considered separately from the Radiocommunications Bill 2017. In February 2018, the Department of the Communications and the Arts published the final recommendations accepted by the government with respect to the spectrum pricing review16 and Commonwealth-held spectrum review.17 The spectrum pricing review included 11 final recommendations in respect of ACMA's allocation decisions, market-based allocations, administered allocations and the cost recovery framework.

The final recommendations with respect to the Commonwealth-held spectrum review included recommendations to establish an advisory committee of relevant government agencies to provide advice to the Minister for Communications on issues of spectrum policy, improve transparency though publishing a consolidated report of Commonwealth spectrum holdings every two years, and exploring a whole-of-government approach to share and trade Commonwealth-held spectrum.

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 repurposed 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 are 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

In October 2017, the government released a 5G directions paper, which outlined the immediate actions for government to take in order to support the timely rollout of 5G in Australia, and focused on:

  1. making spectrum available for 5G in a timely manner;
  2. actively engaging in international spectrum harmonisation activities;
  3. streamlining arrangements to allow mobile carriers to deploy infrastructure more quickly; and
  4. reviewing existing telecommunications regulatory arrangements to ensure they are fit for purpose.

Separately, the ACMA has identified meeting unprecedented growth in demand for mobile broadband and next-generation services as a priority for the next decade.

The ACMA confirmed in its latest five-year spectrum outlook for 2018 to 2022 that its Mobile Broadband Strategy (released in February 2016) remains the basis for the ACMA's response to address the growth in demand for mobile broadband capacity, a key part of which is the articulation of a spectrum management process for the release of additional spectrum for mobile broadband. The latest five-year spectrum outlook also included an updated mobile broadband work programme, which sets out the various mobile broadband spectrum planning projects being conducted by the ACMA.

The ACMA has also continued to undertake a number of other initiatives to progress spectrum management for 5G. In particular, in October 2016, the ACMA released the Future Use of the 1.5GHz and 3.6GHz bands Discussion Paper, which was designed 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 also 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.

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 MNOs (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).

In April 2018, the ACCC released its Communications Sector Market Study Final Report, detailing a number of recommendations on a wide range of competition and consumer issues in the communications market, including broadband and voice services, aggregation and transmission services, data centres and content delivery networks, and the IoT.

On 23 August 2018, the Departments of Home Affairs and Communications and the Arts issued a joint statement that effectively banned Huawei and ZTE from supplying equipment for 5G networks in Australia due to national security concerns inherent in the architecture of 5G. While not specifically listing either company in the statement, the departments stated that:

the government considers that the involvement of vendors who are likely to be subject to extrajudicial directions from a foreign government that conflict with Australian law, may risk failure by the carrier to adequately protect a 5G network from unauthorised access or interference [in accordance with their obligations introduced by the Telecommunications and Other Legislation Amendment Act 2017].18

iv Spectrum auctions and fees

Currently, the ACMA issues spectrum licences through auction, tender or price negotiation processes. The next spectrum auction will be for the 3.6GHz band, which is expected to commence in November 2018. In July 2018, the government announced allocation limits for participants in this auction. Those limits cap the total amount of spectrum that an auction participant will be able to purchase in the 3.6GHz spectrum and are calculated inclusive of any spectrum in the 3.4GHz to 3.7GHz bands that an auction participant already holds. As a result of these limits, carriers with significant holdings in the 3.4GHz to 3.7GHz bands, such as nbn and Optus, are largely precluded from participating in the auction. Separately, Vodafone and TPG have announced, in connection with their proposed merger, that they have formed a joint venture entity with the intention of acquiring 5G spectrum at the auction.

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 expresses 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 Spectrum Review Report notes 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 recommends 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 new rules introduced by the Broadcasting Legislation Amendment (Broadcasting Reform) Act 2017, which increased the minimum requirements for broadcasting material of local significance applying to commercial television networks covering more than 75 per cent of Australia's population. These new requirements commenced on 17 April 2018. For networks not subject to these requirements, the Broadcasting Services (Additional Television Licence Condition) Notice 2014 continues to apply.

Finally, the ACMA also administers the Classification (Publications, Films and Computer Games) Act 1995, and sets the 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.

An amendment to the Copyright Act 1976 was introduced in 2015 to allow 19

Advertising restrictions are enforced by both the ACMA and the Advertising Standards Bureau. 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. The ACMA also administers a number of codes of practice applying to commercial free-to-air TV, radio, pay-TV and online services that prohibit gambling advertisements during the broadcast of live sports between 5am and 8:30pm and otherwise restrict gambling advertising during the broadcast of live sports at other times of day. These codes of conduct came into effect on 30 March 2018, except for the code of conduct applying to online services, which came into effect on 28 September 2018.

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 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 high-definition 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 (Online Content Scheme). This is a light-touch regime compared with the content and classification restrictions imposed on traditional broadcasters discussed above. Responsibility for administering the Online Content Scheme switched from the ACMA to the eSafety Commissioner on 1 July 2015. The remit of the Office of the Children's eSafety Commission was expanded in June 2017 with the Enhancing Online Safety for Children Amendment Act 2017, which transformed the Children's eSafety Commissioner into the eSafety Commissioner. 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 Australia's content classification regime. The eSafety Commissioner's responsibilities were expanded in June 2017, including assuming responsibility for the administration of the takedown notice scheme under the Enhancing Online Safety (Non-Consensual Sharing of Intimate Images) Act 2018. In June 2018, civil penalties were introduced in respect of non-consensual sharing of intimate images, with individuals and corporations facing civil and criminal penalties for failing to remove an image when requested to do so by the eSafety Commissioner.

As noted earlier, there is no net neutrality regulation in Australia, meaning that ISPs 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™ network

The rollout of the nbn™ network continued in 2017 and 2018 and is on track for a 2020 completion, with half of the network rollout completed by June 2018. The number of premises considered ready to connect increased from 5.4 million in June 2017 to 7 million in June 2018. Similarly, the number of premises with active nbn services increased from 2.4 million in June 2017 to 4 million in June 2018.20 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 2014,21 and the updated statement of expectations to nbn on 24 August 2016.22 The multi-technology mix currently involves the use of FTTN, FTTB, hybrid fibre coaxial (HFC) and FTTC technologies alongside the initial FTTP, fixed wireless and satellite technologies envisaged in the original design of the nbn™ network.

The multi-technology mix continues to develop, with nbn introducing FTTC technology on 29 March 2018. In October 2017, nbn announced that it intends to use G.fast technology to provide access to faster speeds on the FTTC and FTTB networks. nbn's trials of G.fast technology to date have achieved speeds of between 500Mbps and 1Gbps in trials. In addition, nbn has announced that it is introducing DOCSIS23 3.1 on its HFC network.

While nbn has continued to scale its network rollout, an increased focus on improving customer experience resulted in it pausing the rollout of HFC between 27 November 2017 and 27 April 2018, introducing new wholesale pricing bundle discounts and further investment in fixed wireless capacity. nbn's revenue profile has been impacted by these customer experience initiatives (primarily the HFC pause and pricing bundle discounts), which delayed a portion of nbn's revenue growth and resulted in a downward forecast of A$3.9 billion for FY20 (compared to the previous FY20 forecast of A$4.9 billion).24

During 2018, nbn has also focused on expanding its services to the competitive enterprise markets, primarily through the proposed introduction of nbn™ Enterprise Ethernet. nbn™ Enterprise Ethernet will be available within nbn's fixed line footprint and will be supplied using end-to-end fibre network links, which will be built on demand.

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 the nbn™ network until 2040. The proposed SAU variation sought to give effect to the addition of FTTN, FTTB and HFC technologies to the nbn™ network. 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. In October 2017, the ACCC announced that it will delay its decision on the SAU variation until further progress has been made by nbn in relation to its consultation with customers on its pricing model.

ii 5G spectrum auction

As discussed in Section IV.iv, the ACMA is preparing to auction 125MHz of available spectrum in the 3.6MHz band in late November 2018. In preparation for the auction, the Minister for Communications and the Arts has directed the ACMA to impose allocation limits of 60MHz in metropolitan areas and 80MHz in regional areas, limiting the amount of new spectrum that carriers with significant spectrum holding can bid for.

iii Regulatory activity by the ACCC

There has been an increase in regulatory action by the ACCC during 2017 and 2018 with several important regulatory instruments and several regulatory inquiries commenced during the course of the past year:

  1. 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;
  2. on 21 August 2017, the ACCC published guidance for retail service providers on how to advertise speeds for fixed-line broadband services,25 following extensive consultation with network providers, retailers and consumer representatives;
  3. on 23 October 2017, the ACCC released its final decision to not declare a wholesale domestic mobile roaming service. This would have allowed MNOs to provide retail services (through roaming) in areas of Australia where they do not have their own network facilities;
  4. in November 2017, the ACCC announced a public inquiry into nbn's wholesale service standards;
  5. on 29 March 2018, the ACCC released the first results from its broadband speed testing programme, which found the busy hour speeds on the nbn™ network marginally below typical speeds at other times;26
  6. on 5 April 2018, the ACCC released its Communications Sector Market Study Final Report detailing the ACCC's recommendations, actions and finding in relation to a broad range of communications services;
  7. on 11 September 2018, the ACCC accepted a court-enforceable undertaking from nbn to make changes to its wholesale service level commitments. This follows concerns raised by the ACCC and customers throughout the (ongoing) inquiry into nbn's wholesale service standards;
  8. on 17 September 2018 the ACCC put telecommunications companies on notice to ensure their advertising is clear and transparent, following the use of the term 'unlimited' to promote mobile data plans; and
  9. on 31 August 2018, the ACCC announced an inquiry into existing declarations (due to expire in June 2019) in respect of unconditioned local loop services, line sharing services, wholesale line rentals, PSTN OA and PSTN TA.

iv Mergers and acquisitions

Following the introduction of the Broadcasting Legislation Amendment (Broadcasting Reform) Act 2017, Fairfax Media and Nine announced Australia's largest media merger, valued at A$4 billion, creating a new media giant under the Nine brand that will create broadcast content across television, radio and online. Nine shareholders will retain 51.1 per cent of the combined entity, with Fairfax shareholders owning the remaining 48.9 per cent. Nine CEO Hugh Marks will lead the new company. The merger is subject to regulatory approval from the ACCC, which commenced an informal review on 16 August 2018. The ACCC is expected to announce its decision on 8 November 2018.

In August 2017, US-based broadcaster CBS 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. The acquisition was completed in November 2017, following the Supreme Court of New South Wales' approval of the share transfer in November 2017 and approval by the Foreign Investment Review Board in October 2017.

In August 2018, TPG and Vodafone Australia announced they had entered into a scheme implementation deed for a proposed merger. The A$15 billion merger will combine as TPG Telecom Limited and is subject to approval by the ACCC.

VII CONCLUSIONS AND OUTLOOK

The rollout of the nbn™ network using a multi-technology mix is expected to be completed at the end of 2020, with 99 per cent of the network footprint now in the design or construction stages or completed. FY19 is projected to be the biggest year in terms of nbn's construction of the network, with more than 80 per cent of Australian homes and businesses forecast to be ready to connect over the nbn™ network by the end of 2019.

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™ network.27 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 TRP, 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™ network once the network is rolled out and fully operational, and a Productivity Commission review into privatisation has been completed and examined by the government.

Several changes to the regulatory environment for TMT are expected to take place in the short to medium term, including new policy and regulatory interventions in relation to digital platforms, data and privacy. This follows several inquiries into the availability and use of data and digital platforms, including the Productivity Commission's Inquiry into Data Availability and Use, the ACCC's Inquiry into Digital Platforms, and the announcement by the Commonwealth Treasury of a consumer data right. While the Productivity Commissioner released its Final Report into Data Availability and Use in 2017, with the government accepting the recommendations, the ACCC is yet to finalise its inquiry into digital platforms.

The government released the draft exposure Treasury Laws Amendment (Consumer Data Right) Bill 2018 on 15 August 2018. The Bill creates a consumer data right (CDR) framework to enable consumers to effectively use data relating to them for their own purposes, including the ability to direct data holders to provide their data to other accredited entities.28 While the CDR will initially be implemented in the banking sector, the government has indicated that the telecommunications and energy sectors will also be subject to the CDR.

As discussed in Section III, the government is in the process of introducing the Telecommunications and Other Legislation Amendment (Assistance and Access) Bill 2018, which seeks to provide law enforcement and national security agencies with powers to compel technology companies to provide assistance to access encrypted communications. The Bill has been referred to the Parliamentary Joint Committee on Intelligence and Security for review, with a final hearing set for 30 November 2018.

The 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. Programmes such as Adelaide's smart city initiative announced in 2017, will likely be the testbed for many of these IoT uses in Australia.

The TMT sector may also experience changes to the regulatory environment in the medium to longer term as the result of the Australian federal election due to take place by the end of May 2019.


Footnotes

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

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

3 The ITS class licence was made under Section 132 of the Radiocommunications Act 1992 and is consistent with the ITS arrangements in other jurisdictions. This harmonisation with wider global developments will likely facilitate the introduction of the latest transport communications technology in Australia's ITS arrangements with wider global developments.

4 Broadcasting Legislation Amendment (Foreign Media Ownership, Community Radio and Other Measures) Act 2018, Section 74F.

5 These processes were amended by the introduction of the Competition and Consumer Amendment (Competition Policy Review) Act 2017 and the Competition and Consumer Amendment (Misuse of Market Power) Act 2017 in November 2016.

6 Australian Government Response to the Productivity Commission Inquiry into the Telecommunications Universal Service Obligation, https://www.communications.gov.au/documents/australian-government-response-productivity-commissions-inquiry-telecommunications-universal-service.

7 Australian Government, Regional Telecommunications Review, Terms of Reference, http://www.rtirc.gov.au/about-the-review.html.

8 Spam Act 2003 (Cth), Schedule 1.

9 Do Not Call Register Act 2006 (Cth), Schedules 1 and 1A.

10 Telecommunications (Consumer Complaints Handling) Industry Standard 2018.

11 Telecommunications (Interception and access) Amendment (Data Retention) Act 2015 (Cth).

12 An eligible data breach arises when there is unauthorised access to, or disclosure or loss of, personal information, and a reasonable person would conclude that the unauthorised access to, or disclosure or loss of, personal information would likely result in serious harm to one or more individuals to whom the personal information relates. See: Privacy Amendment (Notifiable Data Breaches) Act 2017 (Cth), Section 26WE.

13 Privacy Amendment (Notifiable Data Breaches) Act 2017.

14 Privacy Amendment (Notifiable Data Breaches) Act 2017 (Cth), Section 26WF.

15 Ibid., Section 26WQ.

16 Department of Communications and the Arts, Spectrum Pricing – review, February 2018, https://www.communications.gov.au/what-we-do/spectrum/spectrum-reform.

17 Department of Communications and the Arts, Commonwealth Held Spectrum – review, February 2018, https://www.communications.gov.au/what-we-do/spectrum/spectrum-reform.

18 Hon Mitch Fifield, Minister for Communications and the Arts and the Hon Scott Morrison, Acting Minister for Home Affairs, Government Provides 5G Security Guidance To Australian Carriers, Departments of Home Affairs and Communications and the Arts, 23 August 2018, https://www.minister.communications.gov.au/minister/mitch-fifield/news/government-provides-5g-security-guidance-australian-carriers.

19 See Department of Communications and the Arts, Review of the Copyright Online Infringement Amendment, https://www.communications.gov.au/have-your-say/review-copyright-online-infringement-amendment.

21 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.

22 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.

23 Data over cable service interface specifications.

25 ACCC, Broadband Speed Claims Industry Guidance, August 2018, https://www.accc.gov.au/publications/broadband-speed-claims-industry-guidance.

26 ACCC, Measuring Broadband Australia, 29 March 2018, https://www.accc.gov.au/media-release/australias-broadband-speeds-first-report.

28 Treasury Laws Amendment (Consumer Data Right) Bill 2018, Exposure Draft Explanatory Materials, at 5.