2008 is looking to be an even busier year for end users with a raft of policy issues and market developments to be tackled.

ATUG held three Future Forums in 2007 – covering demand trends, technology trends and business model/revenue trends in a High capacity Communications Future for Australia. In February 2008 we will hold the last Future Forum looking at policy and regulatory trends. Future Forums will be held in Melbourne on the 19th of February and in Sydney on the 20th of February. More information will be available soon. ATUG will announce the major trends from the Future Forums at ATUG 2008.

We have outlined below the major policy issues as we see them for 2008 and beyond but would welcome your suggestions as to any other issues we should be representing on your behalf. Please email any contributions to lauren.mcginley@atug.org.au

Universal Service Obligation
The Universal Service Obligation has been a major part of the telecommunications policy framework since the early 1990’s. During 2008 this policy will be redefined and options for funding will be developed and discussed. The scope of the USO may be redefined to include mobile and broadband services, the obligation may be re-cast to a “social safety net” and funding may move from an industry base to explicit government funding via the Communications Fund or general taxation. Key debates will be around “voice equivalence” to ensure accessibility issues are addressed, and access to emergency services.

Telstra’s focus on maintaining margins
Telstra’s approach to the market (both retail and wholesale) is inextricably linked to the decline of margins and volumes for fixed voice services. In FY 2006 Telstra arrested this decline with a tough position on price negotiations, whether retail or wholesale. Moves to fibre and IP networks will see significant opex reductions but these are unlikely to be passed on to end users because of the need for continued margin growth reflected in Telstra’s long-term financial plans. The approach will be the deny, delay, degrade strategy – deny a service can be provided, delay as long as possible including through litigation up to and including the Minister and then offer degraded wholesale services to ensue competitors are not seen by customers as offering equivalent services. Many of the recent exemption applications can be understood in this context. The effectiveness of competition for corporate and government users will depend on regulators holding the line where market power is in evidence.

CDMA switch–off
ATUG has been watching developments since Telstra announced the Next G network in November 2005. The network has been built and is promised to deliver “equivalent or better” coverage. The Minister is to review ACMA’s independent audit of this claim and make his decision known to Telstra by 21 January. The Minister will then make a public announcement. Given the importance of mobile phones to regional end users it is important that coverage is in fact “equivalent or better”. Users who are not satisfied with their Next G experience and Telstra’s response should contact the Government Hotline 1800 883 488 to register their complaint. The audit process now takes account of end user experience which includes the handset and antenna requirements. Withdraw of ISDN services and exhausted ADSL capacity will mean extra data traffic on Next G may impact voice services. ATUG will be suggesting to the Minister that ongoing monitoring will be needed to ensure voice quality is maintained as data usage grows until a competitive market develops.

Fibre to the Node
Discussions in early 2007 between the ACCC and Telstra (ahead of public consultation on a Proposed Undertaking by Telstra in regard to access to the FTTN for competitors) stalled over the cross subsidy for regional services to fund the Universal Service Obligation which in Telstra’s view is not adequately funded by industry. Telstra sought $13.63 per month to cover the cross subsidy. The ACCC was prepared to allow $1.77 per month in the access price for competitors. Funding the USO/regional services has been a key feature of all Telstra’s regulatory activity recently – including its position on ULL pricing. The quoted wholesale price of $85 per month is arrived at by calculating existing margin returns rather than assessing true costs. This tendency to monopoly rather than competitive pricing is the reason a new FTTN service would have to be subject to price regulation. The debate needs to be broadened to Fibre to the Premises and the regulatory framework adopted or adapted will need to ensure affordable services are delivered to end users. Industry focus is still on speeds rather than affordability.

Functional Separation
Around the world regulation is increasingly focused on key bottlenecks using less but more targeted regulatory tools. One of these tools is Functional Separation which allows for investment certainty for all players while promoting continued competition. Functional separation allows regulators to intervene in persistent bottleneck markets where non-discriminatory behaviour cannot be ensured by other remedies. Functional separation has spurred investment in unbundled access lines in the UK with continued increases in market valuation for BT. It is clear that market size in Australia must be taken into account in return on investment and pricing calculations. In 1990’s ATUG’s strong preference was for separated Network and Service Companies. In 2008 Functional Separation provides the tool to achieve this outcome in the new era of significant network upgrade to fibre to the premises.

Operational Separation
The Australian model has been introduced on the basis of the Minister accepting Telstra’s Operational Separation Plan and its sub components of Price Equivalence, Service Quality, Information Security, Customer Responsiveness, Information Security (to be published). The ACCC has published its Retail Pricing Protocol to advise how it assesses potentially anti-competitive behaviour in telecommunications markets, and its views on the concept of 'price equivalence' which is an important element of the operational separation of Telstra. Consultation with industry and end users was via submissions to Telstra. This framework will be reviewed in 2008.

Consumer Protection – SMEs and residential consumers
The focus is changing and is being modeled on behavioural economics which emphasises the role of the consumer as an important market participant rather than a victim needing protection. Consumer focused regulation is directed to empowering and informing the consumer, ensuring freedom of choice to support effective competition and effective redress where errors or faults occur. Examples include pricing and service information to make effective decisions, the ability to switch providers easily and speedily without long lock-in periods or termination fees, proper information on quality issues such as broadband speeds and mobile coverage.

Fixed Services Review
The ACCC made a decision to continue regulation of the ULLS
and PSTN originating and terminating services for a further three years on the basis of lack of strong competitive alternatives to the services provided over Telstra’s fixed copper network. The new declarations expire in June 2009. 2008 will see major inquiries into applications for exemptions from fixed line services regulation by Telstra in 404 Exchange Service Areas (17 in CBDs and 387 in metro areas) on the basis of competitive DSLAM infrastructure. Telstra has also applied for exemptions from regulation of domestic transmission capacity service. Geographic based exemptions may present a particular issue for end users with national communications services requirements. ATUG’s position is that exemptions should only be considered where there is clear evidence of effective, actual competition.
ATUG Submission is here

Broadband
A significant issue for 2008 will be the actual extent of the OPEL network and whether customers who are not within the footprint should be effectively limited in their choice of broadband to satellite services under the Australian Broadband Guarantee funding model which subsidises satellite services to a limit of $2750 but restricts the wireless subsidy to $1000.

Spectrum Planning
This will become an even more important issue in 2008 with the role of wireless clear in meeting broadband demand beyond the copper or fibre. Spectrum planning decisions post the digital dividend of the move to digital media services will open up lower frequency bands which will support longer distances without the need for line of sight.

Mobile Termination Rate Reductions
The ACCC’s decision of June 2004 to reduce termination rates required the price to fall to 12c per minute by 1 January 2007 from 21c per minute which was the lowest known price available in the market on 1 July 2004. The rate was further reduced to 9cpm from 1 July 2007 to 31 December 2008. The declaration decision will expire on 30 June 2009. Even 9cpm is generous compensation for mobile operators. ATUG recommends members negotiate rates with operators.

Policy Review Timeframes
As part of the legislation put in place to approve the sale of Telstra the Government committed to a review of the competition framework for telecommunications in 2009. The Price Control regime will expire on 30 June 2009. Operational Separation arrangements will be reviewed before 1 July 2009. The first legislated review of Regional Communications commenced at the end of 2007 with the Government required to respond within 6 months of the report being tabled. The Universal Service Obligation review commenced in late 2007 with a Discussion Paper from DCITA. Subsidies are set until June 2008. ATUG Submission is here

Broadband Speeds
Broadband speed is an emerging issue for end users as applications become more viable and relevant e.g., Voice over IP. ATUG’s policy is all Australian users should have affordable, multi-megabit symmetrical broadband access. Industry developments in the last months of 2006 which saw increased speeds on offer more broadly were welcome. Also of interest is the ACCC’s position that excessive claims of speed by network service providers can be misleading in a Trade Practices Act sense. Operators will need to delineate the whole range of parameters that dictate the likely speeds the customers will obtain for fixed line or mobile data services. It is not enough for service providers to make ‘blanket claims’ that customers will get speeds ‘up to’ a certain threshold when significant limitations apply to the attainment of those speeds. This issue is on the radar for regulators in many countries.

Long-term interests of end users
2007 has seen continued effort to change the core objective of telecommunications policy from the “long-term interests of end users” to the interests of shareholders and investors. This debate will continue through 2008 and will be a key focus of the review of telecommunications policy in 2008/2009. The ACCC’s regulatory role is to strike a balance between ensuring that investors (taking account of their risks) are not discouraged from undertaking new efficient investment, at the same time, however, ensuring that consumers obtain the benefit of competition. ATUG will continue to emphasise that the core objective of communications policy and regulation must be the long-term interests of end users.