ACCC’s latest work in the telecommunications sector - speech to the Comms Day Summit

Check against delivery.

Introduction

Thank you.

I'd like to begin by acknowledging the Traditional Custodians of the land we are meeting on today, the Gadigal People of the Eora Nation, and pay my respects to their elders past, present and emerging. I'd also like to acknowledge and welcome any Aboriginal or Torres Strait Islander people here today.

Thank you for the invitation to speak at today's Comms Day Summit.

This is an important event on the telecommunications industry calendar, and I'm pleased to have the opportunity to be speaking here once again.

Scene setting

Telecommunications services play an essential role in the lives of Australian consumers and businesses.

In today's digital economy, telecommunications services underpin a range of work, business, education, health, and entertainment needs.

And as demand for these services evolves, so too does the telecommunications sector as it seeks to cater to the changing needs of consumers and businesses.

Amidst this changing environment, it is critical that communications markets remain competitive, and we have effective safeguards in place to protect consumers.

A healthy, competitive communications market is one that delivers value for money products and services that differ in price and quality, reflecting the varying preferences and needs of consumers and businesses.

At a time when cost of living is front of mind for many Australians, it is particularly important that consumers have access to affordable, entry level products and services.

We are all aware of the significant price increases that consumers are experiencing across a range of essential products and services.

More recently, telecommunications services have joined this list, with consumers experiencing higher prices for their mobile and broadband services.

With these cost of living pressures, it is to be expected and encouraged that consumers seek out services that offer the best value for their needs and budgets.

Product choice and competition in the telecommunications retail sector are important elements for keeping retail prices at efficient and affordable levels.

A competitive market means that retailers have incentive to price reasonably and to differentiate products from their competitors, leading to consumers having greater choice and access to innovative products and services.

Late last year, NBN Co rebalanced its wholesale product and pricing offers to simplify and provide certainty to the access costs faced by retailers.

These changes are intended to provide NBN Co with a reasonable opportunity for financial sustainability over time, provided it operates in an efficient and prudent manner.

They also seek to mitigate the risk of wholesale price shocks that can impede competition in retail markets.

Like all changes of this magnitude, there's potential that they will disrupt retail markets, particularly if the information available to consumers is incomplete or misleading.

This is why the ACCC has called on service providers to be open and accurate with consumers about changes to their product offers, including the reasons for these changes.

And I'd like to take this opportunity today to reiterate our expectations and remind retailers of their obligations under the law.

Service providers must not attribute changes in their retail broadband offers to increases in their wholesale access costs if there are other cost or profitability drivers in play.

Not only does this have the potential to mislead consumers, but it would also likely discourage consumers from shopping around to find better offers.

Service providers must also accurately represent the capability of each of their retail broadband offers so that consumers can make informed decisions when deciding which product or service to purchase.

This includes retailers ensuring that they prominently display clear and accurate information that allows households to identify whether a lower priced broadband product would be a viable option for them based on the size of their household and their usage of popular applications.

With NBN Co due to announce wholesale product and price changes for the upcoming financial year shortly, we will continue to pay close attention to how retailers communicate and advertise any subsequent retail changes to consumers.

In particular, we will be looking closely at any changes made to entry level retail offers.

Recently, we have observed that some retailers have stopped marketing or increased the price of entry level plans for new customers. In some other cases the prices of entry level plans remains relatively high. This means a reduction in lower priced plan options for consumers.

We would be concerned to see a reduction in product choice and competition for consumers that can be well supported by entry level offers, particularly given many consumers are facing budget constraints due to cost of living pressures.

In our view, reduced availability and affordability of these products would likely have significant implications for consumers and market efficiency more generally.

I would also like to note NBN Co's intention to consult on the development of low-cost, flat-rate plans as CVC charges continue to be phased out.

Wholesale product development of this type could potentially have an important role to play in supporting more affordable retail offers on the NBN network.

We would also be open to considering other proposals to ensure there continues to be affordable options in the market, should this become necessary.

Last month, the ACCC announced our compliance and enforcement priorities for the upcoming new financial year (2024-25).

In determining our annual priorities, the ACCC considers the key challenges facing our economy and the concerns that occupy our community.

Two of our priorities this year feature the telecommunications industry. These are:

• Promoting competition in essential services with a focus on telecommunications, electricity, gas and financial services, and;
• Misleading pricing and claims in relation to essential services, with a particular focus on energy and telecommunications.

Over the past few years, the ACCC has continued to take cases in the telecommunications sector because of businesses engaging in false and misleading representations.

We will continue to monitor the sector and take action against misconduct.

NBN Co product development and SAU implementation

I'm sure most people in this room are familiar with NBN Co's recent proposal to increase the speed inclusions on three of its wholesale offers where these are provided over its Hybrid Fibre Cable (HFC) and full fibre networks.

Importantly, this proposal is currently open to consultation with internet retailers and other stakeholders.

We welcome NBN Co consulting on these changes. Consultation and responsiveness to the feedback received as part of this process will help promote competition, efficiency, and the long-term interests of consumers.

I would encourage relevant parties to take part in this consultation if you haven't already.

The ACCC has not yet formed a view on what, if any, changes NBN Co should seek to make in respect to this proposal. Instead, we will consider the feedback from industry to the consultation paper before we form our view.

I can say though, that we see a continuing role for a range of wholesale offers that support retail product differentiation.

This approach not only supports retail service providers to effectively compete by better targeting their offers to different household types, it also allows NBN Co and retail service providers to set efficient prices for households that place additional value on incrementally higher speeds.

Without this, we could anticipate consumers facing the risk of higher prices in the long term, as well as reduced choice in the market.

Under NBN Co's new special access undertaking, it will consult with stakeholders on each of its regulatory proposals before each regulatory cycle. This includes its proposed expenditure priorities and service standards for its next SAU regulatory cycle that commences on 1 July 2026.

Earlier this month, we issued record keeping rules for NBN Co's service quality and network performance.

The intention of these rules is to demonstrate if NBN Co's services are meeting consumers expectations for service quality.

The rules come into effect from 1 July this year, with NBN Co required to report to the ACCC on a quarterly basis. The first report is due to the ACCC in November.

The rules cover performance in key service quality areas such as responsiveness in meeting connection and fault rectification requests, timeliness in keeping appointments, and notification timeframes when undertaking planned network outages.

The rules are designed to increase transparency and allow benchmarking of service performance across the NBN, and potentially with other broadband networks. This will help to identify systemic issues that may adversely affect consumers and businesses.

Earlier this month, NBN Co submitted its proposed Accounting Procedures for ACCC approval. These will, among other things, give effect to accounting separation.

This reform was offered by NBN Co in its accepted 2023 SAU variation to provide assurance that it is not unfairly competing in the supply of competitive services including enterprise ethernet and business satellite services, or inflating the costs attributed to its regulated monopoly services.

We will continue to work with NBN Co and industry to ensure the transition to the new SAU remains smooth and NBN Co adheres to the regulatory framework.

Current telco landscape based on recent ACCC reports

As part of our monitoring role, the ACCC regularly reports on competition and market developments in the telecommunications industry.

The insights from these reports help to inform our work in ensuring the telecommunications sector remains competitive and consumers are effectively protected.

For several years now, our wholesale market indicators report has shown that smaller broadband providers, led by Aussie Broadband, Vocus and Superloop, are increasingly growing their market share to compete against the bigger retailers.

Our most recent wholesale market indicators report found that, when combined, smaller providers now purchase one-quarter of all NBN wholesale services.

The sustained growth of smaller broadband providers shows that there is continued demand from consumers for innovative and competitive services.

The report also found that over 77,000 services were activated on the higher capacity fibre to the premises technology in the December 2023 quarter. Growth for 250 megabits per second services and above also continued, increasing by over 50,000 services.

This shows that a segment of consumers want faster internet, but also reiterates our concern in ensuring that customers are not misled into paying for high speed services that they do not need.

I'd also like to note that the average CVC bandwidth that NBN supplied to broadband providers increased to 4.8 megabits per second per user in our most recent wholesale market indicators report, up from 3.1 megabits per second in the previous quarter.

This significant increase was largely related to the new wholesale pricing arrangements introduced by NBN Co late last year and is unlikely to be materially due to any changes in household usage.

However, it also underpinned a pleasing increase in service performance for some plans as measured by our latest Measuring Broadband Australia report.

This report indicates that download performance for NBN's 100 megabits per second and higher fixed line plans in the busy hours rose in December 2023.

With capacity-based charging on 100 megabits per second and above plans eliminated, we saw faster download speeds on those plans during the busy hours as broadband providers no longer have to pay for capacity to meet peak demand.

Declaration inquiry

As many of you would know, the ACCC is concluding a 12-month declaration inquiry that has looked at whether nine wholesale telecommunications services should continue to be regulated.

These services support the provision of broadband, voice and data transmission services.

The ACCC typically reviews the need to regulate telecommunication services every five years to ensure we only regulate services where it is in the long-term interests of Australians.

Late last month, we published our final report for eight of the nine services reviewed by the inquiry.

As I mentioned earlier, the telecommunications sector is evolving, and throughout this inquiry we looked at how recent industry developments, including the completion of the NBN and declining use of Telstra's copper network, have changed how telecommunications services are accessed by consumers and businesses.

We found that most of the services reviewed should continue to be declared for a further five years.

However, the findings of our inquiry mark the end of an era for Telstra's copper network, as we no longer consider declaration of the unconditioned local loop service and line sharing service will promote the long-term interest of Australians.

While these services were once essential to opening up Telstra's fixed line network and enabling competition, the number of consumers and businesses using them today is fast approaching zero.

For context, in 2015 there were over two million fixed line network access services in operation. This figure fell to just under one million in 2019, when the services were last declared.

Our latest inquiry found that there are less than 100 unconditioned local loop and line sharing services in operation today, and alternative wholesale services that could be used instead. This formed the basis of our decision to no longer regulate these services from 30 June 2024.

We have also further reduced the scope of regulation for the domestic transmission capacity service to limit its operation to regional and remote areas.

Competition in regional and remote areas is often limited due to the significant initial investment needed to set up transmission capacity infrastructure.

Continuing to regulate this infrastructure will not only promote competition in regional and remote areas but will likely lead to more efficient use of this infrastructure.

We've also refined service descriptions for this and the fixed voice interconnection services to more accurately reflect the current technologies used to deliver these services.

In terms of next steps, the ACCC will shortly commence an access determination inquiry to decide price and non-price terms for each of the services we have declared.

We will also release a further report on the ninth wholesale service that was reviewed as part of our declaration inquiry, the domestic mobile terminating access service, before the current declaration for this service expires on 30 June 2024.

Enforcing misconduct

More than a decade has passed since the introduction of the Telecommunications Consumer Protections Code.

There have been multiple reviews of the regulatory framework over the past decade, and yet, the overall adherence to the industry's self-regulatory framework still remains too low.

Protections must address and prevent the misconduct we have witnessed by telecommunications suppliers since the code came into effect.

Last June, in our submission to the 2024 Code Review Discussion Paper, the ACCC made clear that the Australian Communications and Media Authority's powers in enforcing industry codes are constrained by a cumbersome two-step enforcement process.

Further, the ACMA's powers to accept the Code or seek improvements to the operation and coverage of the Code are rigid and indirect, and do not provide the ACMA with any power to review the Code to ensure it remains fit for purpose.

The ACMA is also constrained by having low financial penalties available to it when pursuing a breach of an industry code.

A report that was recently published by the University of Technology Sydney's Centre for Media Transition suggested that there may also be questions about enforcement powers available to the ACMA under the Telecommunications Act.

Co-regulation under the industry-led Telecommunications Consumer Protections Code, combined with the framework's two-step enforcement process and disproportionally low-level financial penalties provide very few incentives for industry compliance.

As such, the ACCC is not confident that the current Code review process will result in beneficial outcomes for consumers.

The ACCC is not alone in these views.

The role of co-regulation has recently also been questioned by the Telecommunications Industry Ombudsman and by Australia's peak telecommunication consumer representative body, Australian Communications Consumer Action Network.

In fact, industry itself, via the Communications Alliance, has also suggested reforms that would make industry codes enforceable and not initially voluntary.

But we think that this alone does not adequately address the issues.

The ACCC continues to support the exploration of other regulatory solutions to ensure consumers are protected from misconduct by telecommunications providers.

Conclusion

In closing, I would like to reiterate the ACCC's focus in promoting competition across the telecommunications sector and ensuring there are affordable services made available to consumers.

In line with our compliance and enforcement priorities, we will continue to monitor the way retailers market their products and services to consumers, in particular the capabilities of broadband speeds, and will take action where we see misconduct.

Thank you.

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