Federal Court sends WLR & LCS exemption back to the ACT

Stuart Corner
Friday, 13 March 2009 05:01

IT Industry - Market

The Federal Court has overturned the Australian Competition Tribunal's decision to reject the ACCC's granting of wholesale line rental and local carriage service declaration exemptions in a significant number of exchanges, and has referred the matter back to the ACT.

The court concluded that the ACT had made an error in law and had no power to set aside the ACCC's decision to grant the exemptions because it had no power to review orders made under S152AS and 152ASA of the Trade Practices Act. The full bench of the Federal Court issued its judgement on 11 March.

The ACCC late last year granted Telstra's request to be exempt from the declared WLR and LCS services in some 248 metro area exchange, saying that the move would "promote facilities-based competition by encouraging greater investment in competing infrastructure." Telstra's competitors were outraged and Chime (iiNet) successfully appealed to the ACT to have the ACCC's decision reversed.

Telstra then appealed the ACT's decision to the full Federal Court. AAPT, Agile (Internode), Macquarie Telecom, Powertel, Primus and the ACCC all joined with the ACT and Chime as respondents against the appeal and the telcos were required to pay Telstra's costs of the appeal. The ACCC was required to pay its own costs.

According to the Judgement: "All parties to the application agreed that the Tribunal had no power to set aside the class exemption order in Appendices I and J of the ACCC report [granting exemption from the declared services]." Appendix I was the class exemption from standard access obligations in respect of LCS from Trade Practices Act and Appendix J that for WLR - essential the lists of exchanges in which the ACCC had granted exemptions.

 The ACCC's original decision provoked unusually strong criticism from the industry. The CCC branded it "the decision of a competition watchdog that has lost its way" and said: it had "shaken the competitive industry...badly" because it "sets two profound and disturbing precedents... [that] are also strongly at odds with the Commission approach from the past."

The first shock, according to executive director David Forman was that "The ACCC has broken new ground by removing regulation in locations where there is not competing end to-end infrastructure. The ACCC has in the past only removed wholesale access requirements in Telstra network elements where there are several alternatives that completely bypass Telstra, such as on interstate transmission and fibre-rich CBDs."

The second, and "more stunning" precedent, according to Forman, was that "the ACCC has for the first time removed regulation because there is insufficient competition," Whereas in the past it has "assessed whether competition is strong and sustainable, and if so, whether it can be relied on to protect consumer interests." Forman said the Commission had "adopted a controversial new faith – that it will make competitors invest more if they want to stay in business."