commentary Ten years have now passed since the passage of the 1997 [telecommunications] reforms, which opened infrastructure competition to all comers.
At the time, I was a young adviser in the office of Senator Richard Alston, the then Minister for Communications and the Arts. The stakes were enormous, and I was swept up in a maelstrom of lobbying and counter-lobbying from the industry. All of the lobbyists were happy and unhappy in roughly equal measures at the end, so I guess I did my job reasonably well. Australia ended up with a "world leading telecommunications regime".
It's time now to ask how successful those reforms really were.
Their purpose was primarily to encourage competition --
infrastructure competition -- which would drive investment. This
has largely been achieved in the mobile side of the industry. We
have four infrastructure-based operators duking it out in the
mobile market.
On the fixed side, the picture is much less rosy. ULL (unbundled local loop) was declared at the end of the last decade, and it took five years for broadband in Australia to really take off, and longer for DSLAM competition to begin to make an impact. Investment has been slow to materialise.
But the reforms were intended to deliver more than additional competition. Ten years on, competition was also meant to be in the driver's seat, and regulation was meant to wither away as competitive forces took hold. Unfortunately, that hasn't happened. Regulation is just as intrusive as it was 10 years ago. In some ways, particularly the amount of reporting required, it is much more intrusive. This isn't the way it was meant to play out.
With hindsight, I think there was an oversight in the framework that wasn't apparent until much later. The oversight was the lack of attention to the structural issues. It was assumed that as long as access was made available, it didn't matter who owned what or how they used it. For a long time, this worked.
But confidence in this assumption has been declining for several years. Of course, the Government has been committing growing taxpayer funding to telecommunications infrastructure for many years. The hands-off approach was openly abandoned in 2005, when the Government imposed detailed operational separation requirements on Telstra.
These ad-hoc policy interventions are symptomatic of a growing crisis, triggered by the inability of the 1997 policy regime to manage the structural issues and investment demands of advanced networks. Telstra's FTTN (fibre to the node) proposal and the G9 counter-proposal are the current nexus of this crisis. Both offer a model of ownership, competition regulation and investment incentives. Both claim to be in the national interest, and to balance the need for both competition and investment capital.
But how are these competing claims to be measured? It is hard to say in the absence of a comprehensive policy framework that maps out the complex set of relationships between industry structure, investment incentives and competition policy. We barely understand how all of these imperatives relate to one another and how they should be managed. The analysis and hard policy yakka haven't been done. So instead, the debate descends to rhetoric and head-butting.
But that hasn't prevented both sides of politics from getting very hands-on in their industry management. Everyone seems to have implicitly decided that some kind of zero-sum trade-off exists between maintaining a competitive market and getting NGN investment. And since no one wants to ditch competition, the only alternative is to throw millions and billions of taxpayer funds into broadband access networks, because "it won't happen otherwise". The two sides of politics only differ in degree. Right now, neither could draw a principled line on the limits to public spending.
I don't have a problem with either government spending or structural policies -- in principle. But I can't help worrying when a significant bipartisan policy shift happens without open consultation, without a base of economic and policy analysis to support it, and without clear criteria established for policy intervention. As we are seeing, investment decisions become a game of chance, and rumour and scuttlebutt become rife.
Criticise the '97 reforms all you like, but the open, consultative approach left no-one with any illusions about what was meant to be achieved, how it was to be achieved, and importantly, why it was necessary. And I don't see why such an important issue -- the creation of Australia's next-generation ICT infrastructure -- deserves any less. Particularly when both sides of politics are committing to spending significant taxpayer funds to get there.
The transition from monopoly to competition between 1989 and 1997 was a major shift in industry structural and regulatory arrangements. We are moving into a similar period of restructuring.
Whoever ends up in the Minister's chair in the next parliament has an opportunity. A next-generation network needs a next-generation policy framework, and both sides of politics still have the policy wiggle-room needed for a systematic policy rethink. That framework needs to be developed in an open forum that forces all of the industry participants to surface their assumptions and arguments, where they can be assessed and measured against the national interest. If any tradeoffs between investment, competition, and the taxpayer funding are necessary, let's see the arguments for them.
This isn't beyond our wit -- we've done it before. Australia once had a "world leading telecommunications regime". It can have one again.
David Kennedy is a research director at the Australian division of analyst group Ovum.
What a shame that the “open, consultative approach” didn’t take more notice of those calling for the separation of the infrastructure from Telstra before 1997. Those advocating the separation were at odds with the Governments’ aim of maximising the sale of Telstra and were ignored. To me, this highlighted the major problem with the whole approach, being that the Government was looking for views that supported their strategy regardless of the outcome. Well the “outcome” is where we are now, with a national telecoms network that doesn’t meet current or future requirements, a regulatory nightmare and the monopoly strong as ever. Let’s hope the next round of consultation listens to the wisest not the loudest!