Beyond Access Regulation

It is not my intention to post here in relation to matters that are really about the core of my day job. However, I was asked my view about the decision by the ACCC in its Position Paper on its strategic review of the regulation of fixed services to continue the declaration of ULL and PSTN interconnect access for a period of only three years.

I will admit to not having yet read the detail of the paper. But I did offer the following simple reaction.

Because the 2003 legislative changes mean the ACCC has to put a "sunset" date on a declaration of within five years, the ACCC had to form a view. Using the full five years would give the perception that the ACCC doesn't take the sunset clauses seriously.

In this case though, the ACCC continues to have the (in my view misguided) belief that the speed of technological change will result in "new networks" (at least in some areas) to create an environment of infrastructure based competition.

If you have that view, offering the full five year horizon on the regulation creates an incentive for possible alternative network builders to delay investment and utilise the access regime longer. However, on the flip side, creating uncertainty about the availability of the regulated services beyond three years should also "chill" investment, because investments that rely on the access will need to be fully recovered within three years.

Ultimately, this indicates the weakness in an access regime - there is no convenient way to exit. When the Productivity Commission reviewed the telecommunications regime they explored the concept of using the anti-competitive conduct provisions "on the shoulder" of regulation. However, the decision to no longer declare the service is tantamount to saying market power doesn't exist and therefore the provisions can't apply.

An option is the creation of a "shadow period" in which the regulator maintains the access obligation on the access provider but vacates the field as a price setter/arbitrator and only relies on price monitoring/anti-competitive conduct regulation. In this way a "viable" wholesale market can evolve.

Now the problem is that someone might actually read this and think it is a good idea!