accc discussion paper about fanoc sau - 21 jun 07

8/13/2019 ACCC Discussion Paper About FANOC SAU - 21 Jun 07

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FANOC Special AccessUndertaking in relation to the

Broadband Access Service

Discussion Paper

June 2007


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Table of Contents

Table of Contents................................................................................................................ 2

1. Preface ......................................................................................................................... 41.1. Submission deadline ........................................................................................... 4

1.2. Commercial-in-confidence material ................................................................... 4

1.3. Format of submissions ........................................................................................ 5

1.4. Contact and submission lodgement details ......................................................... 5

2. Introduction.................................................................................................................. 6

2.1. Part XIC and Special Access Undertakings........................................................ 6

2.2. FANOC Fibre network and BAS service............................................................ 6

2.2.1. Background on G9 /FANOC........................................................................62.2.2. Proposed network deployment .....................................................................72.2.3. Proposed organisational and governance structure ......................................92.2.4. Proposed access services............................................................................10

3. Summary of the Undertaking..................................................................................... 11

3.1. The Undertaking ............................................................................................... 11

3.2. Service description............................................................................................ 12

3.2.1. The Broadband Access Service..................................................................123.2.2. BAS Products .............................................................................................123.2.3. Addition, withdrawal and variation of BAS Products................................15

3.2.4. Service Description ....................................................................................153.3. Price-related terms and conditions.................................................................... 16

3.3.1. Pass-through component..........................................................................163.3.2. FANOC component charge........................................................................163.3.2.1. Initial period prices.....................................................................................193.3.3. Addition/withdrawal of BAS products.......................................................203.3.4. Prices for basic telephone services.............................................................203.4. Non-price terms and conditions ........................................................................ 18

3.4.1. Transitional arrangements and roll-out ......................................................223.4.2. Equality of access to information...............................................................23

3.4.3. Additional terms to be negotiated between FANOC and AccessSeekers .......................................................................................................233.5. Management principles..................................................................................... 24

3.6. Expiry date and the term of the Undertaking.................................................... 26

3.7. FANOCs Submission in support of the Undertaking ...................................... 26

4. The legislative criteria for the assessment of undertakings ....................................... 28

4.1. Publication of undertakings and invitation to make submissions..................... 29

Discussion Paper FANOC Special Access Undertaking 2


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4.2. Consistency with standard access obligations .................................................. 29

4.3. Reasonable terms and conditions...................................................................... 30

4.4. Consistency with Ministerial pricing determination......................................... 30

5. The ACCCs process for assessing the Undertaking ................................................. 32

5.1. Process .............................................................................................................. 32

5.2. Confidentiality .................................................................................................. 33

5.3. Time limit for assessment ................................................................................. 34

Appendix 1 - Submission Template.................................................................................. 35



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1.PrefaceFANOC Pty Limited lodged a special access undertaking pursuant to section152CBA in Division 5 Part XIC of the Trade Practices Act 1974with the AustralianCompetition and Consumer Commission on 30 May 2007. The Undertaking

specifies the terms and conditions upon which FANOC undertakes to supply what itterms the Broadband Access Service.

Hereafter, FANOC Pty Ltd is referred to as FANOC; the special accessundertaking as the Undertaking; the Trade Practices Act 1974as the Act; theAustralian Competition and Consumer Commission as the ACCC; and theBroadband Access Service as the BAS.

Under Part XIC of the Act, the ACCC must accept or reject the Undertaking. Theprocess the ACCC will follow to assess the Undertaking will be open and public,allowing parties to express their views and provide relevant information to the

ACCC.

As well as lodging the Undertaking, FANOC has provided a Submission (theSubmission), with five Schedules attached, to the ACCC in support of theUndertaking. Public versions of the Schedules are on the ACCCs website.

FANOC has indicated to the ACCC that it intends to establish a confidentialityregime for access to information confidential to FANOC. Interested parties whowish to obtain access to the confidential version of FANOCs Schedules shouldcontact Andrew Sheridan, Company Secretary, FANOC Pty Limited c/o SingTelOptus Pty Limited, 101 Miller St, North Sydney, 2060, telephone: (02) 9342 8437.

1.1. Submission deadlineInterested parties are invited to make submissions to the ACCC in relation to theUndertaking no later than six weeksfrom the date of publication of this DiscussionPaper. That is, submissions should be made by no later than 5 pm, 7 August2007. The ACCC will consider these submissions in deciding whether to accept orreject the Undertaking.

1.2. Commercial-in-confidence materialAll submissions will be considered as public submissions and will be posted on theACCCs website.

If parties wish to submit commercial-in-confidence material as part of theirsubmission to the ACCC, parties should submit both a public and a confidentialversion of their submission. The public version of the submission should clearlyidentify the confidential material by replacing the confidential material with anappropriate symbol or c-i-c.



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The ACCC encourages parties to make their submissions in a way that facilitatesthe efficient assessment of their various submissions, including the verification ofany facts or data upon which those submissions are based. In this regard, parties areencouraged to restrict confidentiality claims to a minimum and to establish

appropriate confidentiality regimes for the disclosure of any information that isclaimed to be confidential.

1.3. Format of submissionsTo facilitate the efficient assessment of submissions, the ACCC has provided asubmission template (Appendix 1) to assist parties in:

meeting the ACCCs formatting preferences; and outlining the key issues that should be addressed in their submissions.

The ACCC would prefer that interested parties use this template to make theirsubmissions.

Submissions must:

be provided electronically (in MS Word or PDF format) that is text-searchable to allow a copy and paste function;

use a text font size no smaller than 12 pt, Times New Roman; be single-spaced; and include a copy of the decision or extraneous material attached to the

submission, with the relevant referenced sections clearly marked, wherequotes from a court or tribunal decision or other extraneous material (such asconsultants reports) are relied on.

1.4. Contact and submission lodgement detailsWritten submissions from interested stakeholders must be lodged no later than 5pm7 August2007. All submissions should be forwarded by emailto:

General ManagerStrategic Analysis and Development BranchAustralian Competition and Consumer Commission

GPO Box 520MELBOURNE VIC 3001Email: [email protected]: 03 9290 1855

Enquiries may be directed to Anthony Wing, Director, Convergence, on 03 92901804 or [email protected].

mailto:[email protected]:[email protected]:[email protected]:[email protected]


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2.Introduction2.1. Part XIC and Special Access UndertakingsPart XIC of the Act establishes a regime for governing access to certain services inthe telecommunications industry. The ACCC may declare carriage services andrelated services to be declared services. Providers of an active declared service(access providers) have an obligation to supply that service.

As an alternative to the ACCC declaring a particular service, a party providing thatservice may give a voluntary undertaking (known as a Special Access Undertakingor SAU) to the ACCC. In giving an SAU to the ACCC, the access provider agreesto the obligations to supply their service (contained in s. 152AR of the Act) as if itwas a declared service.

The purpose of the SAU provisions in the Act is to provide certainty for potentialinvestors in telecommunications infrastructure and services in relation to access tothat infrastructure or service in the future by allowing the ACCC to rule on whetherthe terms of a proposed undertaking are acceptable prior to the investment beingmade.1

There are generally many matters that need to be resolved by a carrier or

potential carrier before investing, including engineering design, planning,

finance and other regulatory approvals (such as obtaining a carrier licence).

Seeking regulatory certainty as to the terms of third party access to the

proposed network is only one such matter. In assessing a special access

undertaking, the ACCC is not considering whether to approve a proposedinvestment or not. Firms must make their own investment decisions, based on

many factors. The ACCC is only considering whether, if the investment did

proceed, the terms and conditions of third party access to the network,

including the proposed prices, are reasonable under the Act.

2.2. FANOC Fibre network and BAS service2.2.1. Background on G9 /FANOCFormed in June 2006, the G9 is a consortium of telecommunications companiescomprising AAPT, iiNet, Internode, Macquarie Telecom, Optus, PowerTel, Primus,

Soul and TransAct. The G9 was formed to develop a proposal for a fibre-to-the-node (FTTN) open access network. The G9 has stated that an essential element ofthe G9 proposal is the separation of the ownership and operation of the network.

FANOC is the company, created by the G9, to own the network. As the futureowner of the network and therefore a person who expects to be a carrier or a

1Explanatory Memorandum to the Telecommunications Competition Bill 2002.



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carriage service provider supplying [] a listed carriage service within s. 152CBAof the Act, FANOC has lodged a SAU. FANOC has stated in its Submission that itwill apply to the Australian Communications and Media Authority (ACMA) for acarrier licence in respect of the network.

The Submission explains that the shareholders and board of FANOC will be re-constituted at the financing stage of the project when a range of third party debt andequity investors are expected to invest in the network as a stand alone financialinvestment. The structures for that later investment have not yet been finalised.Accordingly, the Undertaking includes a concept of FANOC Ownership Entitiesto allow flexibility to establish what FANOC considers to be the most efficientinvestment structures for those investors.

2.2.2. Proposed network deploymentFibre-to-the-node is a means of upgrading the existing telecommunicationscustomer access network (the so-called last mile), so that high-speed broadbandservices are available throughout the rollout area (the footprint).

Currently, the customer access network consists of a series of local exchangesconnected back into the core network by fibre. For example, there are severalhundred local exchanges servicing the metropolitan areas. Running from these localexchanges are copper lines going, via a series of pillars, to individual homes.

These copper lines provide voice services and, (where a carrier has upgraded themby connecting DSLAM equipment to them at the local exchange), broadbandservices such as ADSL and ADSL2+.

The quality and speeds of broadband available to any customer depends on a rangeof factors including the length of the copper line (ie. the distance from localexchange to home), the quality of the copper line, whether there are anyimpediments to broadband on the copper line (such as pair gain systems), andcongestion in the network.

The length of the copper line is one of the key factors. ADSL2+, for example, iscited by FANOC as being capable of providing speeds of up to 12 Mbps over acopper line of no more than 1.5km in length, with higher speeds over shorterdistances and speeds decreasing beyond 1.5km.

2 VDSL2 is generally cited as being

capable of providing even higher speeds, for example up to 50Mbps over a copper

line of no more than 800 metres with speeds decreasing beyond that. It has beenestimated that only a third of customers in metropolitan areas are currently within1.5km of a local exchange.

2FANOC Submission, p 12. The ACCC notes that achieved speeds vary based on a number offactors, including length and quality of copper wire from the exchange, interference from other users,electrical interference, the site being accessed, and the customers wiring, software, and hardware.



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A FTTN upgrade could involve rolling fibre further into the customer accessnetwork, so as to reduce copper lengths. Thousands of local street-corner cabinets(nodes) containing DSLAMs are installed in the network at points closer to homesthan the current local exchanges. Fibre from the core network is then run all theway to these street-corner nodes. The end-result is that almost all homes within the

network footprint have remaining copper lengths from node to home of less than1.5km, allowing for the near-universal provision to customers within the footprintof high-speed broadband services such as ADSL2+ or VDSL2.

FANOC proposes to roll out a Hybrid Fibre Twisted Pair (HFTP) fibre-to-the-node network in a manner similar to that described above, hereafter described asthe Network.

In its Submission FANOC states that its initial network rollout, which is planned tooccur over a three year period, will:

cover approximately 4 million homes in five capital cities, using ADSL2+ technology, for aninitial capital cost of approximately $3.6 billion. ADSL2+ is currently capable of achievingspeeds of up to 24Mbps under an HFTP FTTN configuration.3

Following the initial rollout the network footprint may be extended to some regionalareas.

The Submission continues:

The network will be able to be transitioned to a VDSL network over time when there issufficient consumer demand for very high speed broadband services. VDSL allows speeds of upto 50Mbps within the planned architecture.

The interests of users of standard telephone services would be met in the conversion to theNetwork. The Network will not require any immediate changes to end user equipment or tocustomer phone numbers. However, over time, the network could be transitioned to a fully IPbased network.4

Finally, FANOCs Submission has noted that in order to build this Network, it inturn requires access to Telstras copper tails, ie. the remaining copper connectionbetween the new nodes and customer premises. Telstra would be compensated forproviding access to the copper tails via a process that is privately negotiated or,failing agreement, is resolved by arbitration. The G9 has separately argued that thisaccess requires both a variation to the existing Unconditioned Local Loop Service

declaration to allow access to the copper at Telstras street-corner pillars (alsoknown as sub-loop unbundling), and a legislative amendment to the Act to allowFANOC to access 100% of the copper sub-loops, described in Appendix 5 to theSubmission.

3at page 34at page 3



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At this point in time, however, the ACCC has not formed a view on whether thedeclaration should be varied, nor does it know whether the legislation will beamended.

As stated in the previous section, there are generally many matters that need to be

resolved by a carrier or potential carrier before investing, including engineeringdesign, planning, finance and other regulatory approvals (such as obtaining a carrierlicence). In this immediate process of assessing this particular regulatoryapplication a special access undertaking relating to third party access theACCC is only considering whether, if the investment did proceed, the proposedterms and conditions of that third party access to the network are reasonable andconsistent with the standard access obligations under the Act.

2.2.3. Proposed organisational and governance structureAn integral component of the Undertaking is the separation of the ownership andoperation of the network. FANOC argues that the corporate governance model thatit proposes embeds the correct economic incentives for pro-competitive outcomesand that this will ensure that consumers receive the lowest price and greatestquality benefits from open broadband competition.

5

FANOC will finance the acquisition and deployment of, and ultimately own, theNetwork. FANOC will appoint an entity (known as the BAS Manager) to manageaspects of the operation of the Network. The Undertaking guarantees that the ownerof the Network (FANOC) will not be controlled by any one access seeker or therelated bodies corporate of any one access seeker.

6 The Undertaking further

provides that FANOC will not be controlled by a group of access seekers, or theirrelated bodies corporate, acting in concert to control the material terms for BAS

products set by FANOC.7

Both access seekers and institutional investors will have an opportunity to invest inFANOC, with the proviso that no single access seeker, or group acting in concert,may control FANOC. FANOC must not discriminate against an access seeker thatis not an investor in FANOC in setting terms of supply of BAS products.8

FANOC will not provide retail telecommunications services. Instead its objective isto deliver high quality and cost effective wholesale services to access seekers whowill then compete in the retail market.

The BAS Manager will be owned by access seekers, with the proviso that noindividual access seeker, or group of access seekers who have a financial interest inFANOC, will be able to control it.

9 Each access seeker that is not a related body

5FANOC Submission, p3-46clause 4.1(b)(i)7clause 4.1(b)(ii)8clause 4.1(c)9clause 4.1(e)



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corporate of another BAS Manager member will be entitled to membership of theBAS Manager.

10 Clause 4.1(d) sets out the principles for voting rights for each

BAS Manager member and limits the maximum percentage of the total voting rightsof all BAS Manager members such that no two BAS Manager members inaggregate hold more than 40% of the aggregate voting rights.

The BAS Manager will be comprised of independent directors as well as directorsnominated by members of the BAS Manager.

11

The BAS Manager will be responsible for:

(i) consulting with FANOC regarding the introduction, variation orwithdrawal of BAS Products;

(ii) reviewing, participating in the preparation and consulting on all budgetsincluding the business plan for construction, ownership, operation andmanagement of FANOC and the Network;

(iii) consulting with FANOC on the appointment of an independent reviewer;(iv) keeping, full and accurate records, supporting all costs and revenue

included in the Pricing Model; and

(v) preparing and submitting to FANOC non-price terms for each BASProduct including:

forecasting, ordering, provisioning, billing and associatedprocedures; and

technical and quality of service specifications.2.2.4. Proposed access servicesThe central objective of the Undertaking is for the provision of Broadband AccessServices, as well as a basic telephone access service, to access seekers over a HFTPfibre-to-the-node network.

FANOC proposes that these access services will be made available to all parties,including the members of the G9 consortium, Telstra and any other access seekersat a standard set of rates.

These access services and the prices, terms and conditions on which FANOCproposes they be offered are summarised in the next chapter.

10clause 4.1(d)11clause 4.1(f)



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3.Summary of the UndertakingThe Undertaking specifies the terms and conditions on which FANOC undertakes tosupply the BAS to access seekers, and meet its standard access obligations under

s.152AR of the Act to the extent that those obligations would apply to FANOC ifthe BAS was treated as an active declared service.

Specifically, the Undertaking outlines the pricing that FANOC proposes to chargeaccess seekers for the supply of BAS.

In addition to the body of the Undertaking, there are three schedules attached:

1. Schedule 1 provides a description of the Network (or HFTP Network);2. Schedule 2 comprises a description of the BAS, including specifying the initial

BAS products to be offered; and

3. Schedule 3 comprises the pricing methodology by which, in conjunction withpart 7, FANOC will calculate monthly access charges payable by accessseekers.

FANOCs application also includes the submission in support of the Undertaking.The Submission includes five schedules containing supplementary material and anexpert report these are listed in section 5.1.

3.1. The UndertakingThe Undertaking includes sections relating to:

commencement and duration; general undertaking terms and conditions; third party access services, including prices, terms and conditions the management principles; budgets; record keeping and review; equality of access to information; appointment of an independent reviewer and matters submitted to the

commission or an independent reviewer for a decision; and variation, replacement, withdrawal or extension of the Undertaking.

The ACCC seeks views of interested parties on the reasonableness of all the termscontained in the body of the Undertaking with reference to the matters outlined inAppendix 1 to this Discussion Paper.



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3.2. Service description3.2.1. The Broadband Access ServiceThe Broadband Access Service is the proposed access service and is defined in

Schedule 2 of the Undertaking as:

Any Carriage Service provided by a FANOC Ownership Entity:(a)Over the HFTP Network; and(b)Between an End User POI and an Access Seeker POI.

The Undertaking illustrates the HFTP Network in Schedule 1 as:

3.2.2. BAS ProductsThe Broadband Access Service is to be provided in the form of specific BASProducts. Initially five BAS Products are to be provided and these are defined in

Schedule 2 of the Undertaking as:(a)a basic telephone access service implemented using voice over IP

(VOIP); and

Four standard broadband services which are bitstream services deliveredover ADSL2+:

(b)1.5 Mbps broadband service



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(c)6 Mbps broadband service(d)12 Mbps broadband service(e) Unlimited broadband service

3.2.2.1. Basic Telephone Access ServiceThe Basic Telephone Access Service is defined in the Undertaking as an accessservice to allow the provision by an access seeker of an IP telephony based standardtelephone service or equivalent service to a residential end-user.

It is provided using an analogue service from the end-user premises to the node(allowing customers to continue to use existing telephone handsets), and using anIP-based service over the service aggregation network.

It does not include resale services or an end-to-end carriage service between twoend user's premises. It is an access service for the carriage to a relevant point ofinterconnection with the access seeker's own network. Switching capability andother service functionality will be differentiated by the access seeker in accordancewith its voice switches.

The Submission states that other legacy voiceband services (such as alarms) areaccommodated using Special Access Service cards and a program to migratecustomer premise equipment to IP solutions.

3.2.2.2. Standard Broadband ServicesThe standard broadband services are described in the Undertaking as an IP-basedLayer 2 point-to-point transmission service. All standard broadband services alsoinclude the Basic Telephone Access Service to allow access seekers to providevoice calls.

Initially the broadband services will be offered over ADSL2+ but the Submissionnotes that the network will be able to be transitioned to a VDSL network over timewhen there is sufficient consumer demand for such services.

The BAS specifications for the standard broadband services (set out in annexures Bto E of Schedule 2 of the Undertaking) incorporate compliance with various ITUstandards, ANSI standards, DSL Forum standards and Communications Alliancecodes.

Access seeker points of interconnections (POIs) are illustrated in the diagram inSchedule 1 of the Undertaking.

The BAS specifications for the standard broadband services note that The nodeprovides VLAN handling, Ethernet/VLAN aggregation, Security, QoS,Multicast/IGMP and OAM capability and similarly for the Local and TransitAccess Points.



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The Submission notes that Access seekers will have Network Management accessto all elements of the HFTP (including the DSLAM and Backhaul network) forProvisioning, Capacity Management, Service Assurance, etc.12 Access seekerswill have network visibility at the DSLAM level.

In each of the proposed BAS specifications for the standard broadband services theService Performance Objectives include The targeted minimum downstreambandwidth is 1.5 Mbps.

The Undertaking and Submission do not specifically comment on all potentialdetails of terms and conditions of access to the BAS. For example, matters whichare not covered in detail in the Undertaking itself include IP network inter-connection in relation to maintaining network integrity between the networks of thevarious access seekers (for example, in controlling malicious traffic); or detailedrules as to how congestion is to be managed (ie. how the backhaul capacity from a

node and through the Service Aggregation Network is to be shared equitablybetween Access Seekers and end-customers and also between different types ofapplications). The Undertaking provides that where terms are not specificallyaddressed by the Undertaking, these will be subject to commercial negotiationbetween the parties and failing agreement to arbitration by the ACCC.Alternatively, Communications Alliance codes or Australian Communications andMedia Authority (ACMA) standards could be appropriate.

The ACCC seeks views of interested parties as to whether the Undertakingreasonably provides for parties to interconnect and use the service, in a manner

consistent with the Standard Access Obligations.

The ACCC seeks views on whether the Undertaking reasonably and in accordancewith the Standard Access Obligations deals with:

1. Standards2. Points of interconnection3. Congestion4. Managing network interconnection and network integrity5. Co-ordinating multiple parties with network management access6. Ensuring access is sufficient to meet access seekers quality of service

requirements, including those under the customer service guarantee

7. Transition of other voiceband services or their migration to IP.

12FANOC Submission, p10



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3.2.3. Addition, withdrawal and variation of BAS ProductsThe Undertaking provides for the introduction of additional BAS Products as wellas the variation and withdrawal of existing BAS Products (part 6). However theACCCs approval is required before FANOC can withdraw or alter the basictelephone access service, or alter or withdraw any of the other initial BAS Productswithin the first 3 years of the operation of the Network. After the initial 3 yearperiod FANOC may vary or withdraw any BAS Product after consultation with theBAS Manager and after providing reasonable notice13to access seekers.

Pricing of new BAS Products is discussed below.14

In its Submission15

FANOCargues that as it will only be supplying carriage services to access seekers it will nothave any incentive not to provide an access seeker with a service of any particulartechnical parameter or operational quality for which there is demand - provided thatany incremental costs involved in the provision of that product (including lost saleson other products) are likely to be met by higher revenue.

The ACCC seeks views of interested parties as to whether the proposed means ofadding, varying or withdrawing BAS products is reasonable and consistent with theStandard Access Obligations; and whether the proposed FANOC structure affectsthis view.

3.2.4. Service DescriptionFANOC submits16that the BAS description is wide enough to capture all potentialaccess services that may be able to be provided over the HFTP Network throughoutthe term of the Undertaking. Therefore if the Undertaking is accepted:

(a)any service that FANOC provides to an access seeker that involves carriageover the HFTP Network as described in the Undertaking, will be deemed tobe a declared service by subsection 152AL(7) of the Act;

(b)the standard access obligations, including the obligation to supply an activedeclared service to an access seeker will apply to any such service.Therefore, all access seekers will be entitled to any service supplied to anyother access seeker;

(c)any service that FANOC provides that involves carriage of the HFTPNetwork will be accounted for in the pricing model described in Schedule 3of the Undertaking. In effect this will mean that all services provided over

the HFTP Network will be subject to the same cost control and efficientpricing incentives as the initial BAS services; and

(d)if an access seeker is unable to reach agreement with FANOC in respect ofthe terms and conditions on which any such service is supplied, the terms of

13See paragraph 3.4.2 below.14See paragraph 3.3.3 below.15At p1516FANOC Submission, p13



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the Undertaking will apply and the ACCC can arbitrate a dispute in relationto terms and conditions of supply that are not covered by the Undertaking,under Division 8 of the TPA.

The ACCC seeks views of interested parties as to the reasonableness of FANOCs

proposed service description.

3.3. Price-related terms and conditionsThe Undertaking specifies the price terms and conditions under which FANOC willprovide access to the BAS. It specifies that FANOC will offer the same prices to allparties on a non-discriminatory basis.

The total price that an access seeker will pay for access to the Network willcomprise two elements:

1. A Pass-through Componentincorporating ULLS, or equivalent, accesscharges for access to the sub-loop; and

2. A FANOC Component Chargewhich is a charge for access to the FANOCSAN network plus the node to pillar interconnect, calculated according to aspecific pricing model. A single BAS product may include a number ofFANOC component charges.

3.3.1. Pass-through componentThe HFTP network requires access to the Telstra sub-loop from the pillar to end-

user premises in order to provide BAS services. Access from the pillar will require acharge be paid from FANOC to Telstra for the use of that sub-loop. TheUndertaking provides for these charges to be passed-through to access seekers atcost. The Undertaking does not discuss in any detail how the value of this pass-through component will be determined. Two standard options to determine thisvalue are by commercial negotiation with Telstra or, if the ULLS sub-loop isdeclared, by an ACCC determination following an access dispute. It is important tonote, therefore, that the maximum FANOC component prices referred to in theUndertaking do not include this pass-through component.

For the purpose of providing indicative all-inclusive prices for the first period,

FANOC has assumed this component will fall between $5 and $15 per month.

3.3.2. FANOC component chargeThe Undertaking sets initial prices for the FANOC component charge of the BASservices for the initial three year period, and then provides a formula for re-settingthose prices for successive four year access periods. The pricing methodology bywhich FANOC will calculate component charges payable by access seekers is



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described in detail in Part 7 and Schedule 3 of the Undertaking. Additionalinformation is provided in Schedule 4 in the NERA report.

FANOC explains its pricing model as having two steps:

Target Revenue required to recoup costs. At the beginning of eachperiod, a calculation will be made of costs (capex and opex). Then theTarget Revenue required for FANOC to recoup its costs is calculated. TheTarget Revenue includes a return on capital (at the regulated WACC), areturn of capital (depreciation), and operating and capital expenditures.

Resultant overall price cap on prices. On the basis of demand forecaststhat have been developed (and which will be approved by the BAS Manager,the Commission or the independent reviewer), an overall price cap is thendetermined. The overall price cap is set at the level that provides thepercentage change in prices needed across all products, so that FANOC will

earns its Target Revenue if it meets the forecasts.

17

The ACCC notes, after the initial three year period, FANOC proposes a weightedaverage price cap approach to pricing. Such an approach is widely used in otherregulated industries such as gas and electricity, though it has not been usedpreviously in telecommunications access pricing. In general terms, under a weightedaverage price cap approach a firm is given the discretion to set individual prices forits regulated services, subject to the restriction that changes to regulated prices are,in combination, not greater than a change in a weighted average price. Thisweighted average price is set such that a firm can recover an amount which satisfiesa predetermined specific revenue requirement. To ensure that this predeterminedrevenue requirement is met, the weighted average price can increase, or decrease,over time according to a CPI-X formula.

An important element of the weighted average price cap approach is that therevenue a firm earns depends on the individual prices its sets for different servicesand the volume of each service sold at those prices. This is seen to create importantincentives for the development of efficient pricing structures. However, it has alsobeen argued that, in some settings this approach can reduce incentives for ensuringquality is maintained.

Given the nature of the FANOC investment which involves the development of anew network the price cap involves a return on the actual costs of construction(rather than modelled costs). The rate of return (or WACC) uses the actual cost ofdebt and the actual cost of equity capital (rather than a modelled cost) arising fromthe initial investor bookbuild (capital auction), with an upper limit on the equitybeta of 1.0. This means of calculating the actual equity beta has not previously beenused by the ACCC.

17FANOC Submission, p25



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The key elements of the proposed pricing methodology for the FANOC componentcharge are:

(1) On the basis of long-term estimates of costs and demand, in the first accessperiod, maximum prices for the FANOC component charge will be set at:

$10 for a basic telephone access service

$14.23 for a 1.5 Mbps broadband service (including basic telephoneaccess for voice)

$18.46 for a 6 Mbps broadband service (including basic telephoneaccess for voice)

$26.92 for a 12 Mbps broadband service (including basic telephoneaccess for voice)

$35.38 for an unlimited broadband service (including basic telephoneaccess for voice).

(2) In the second and subsequent access periods, the maximum prices for theFANOC component charge will be determined according to a WeightedAverage Price Cap formula. Specifically, the maximum prices for theFANOC component charge must not, in combination, result in a level ofrevenue which exceeds a predetermined revenue requirement. Thispredetermined revenue is calculated according to a CPI-X approach.

(3) The value of X in the pricing model will be determined in each accessperiod, such that the present value of forecast revenues in that accessperiod equates to the present value of the target revenue requirementsover that access period.

(4) The target revenue requirement for each year of each access period willbe determined in such a way so as to include a target level of expenditure, atarget return on assets, and a target return of capital. The terms targetexpenditure, target return of capital and target return on assets all havea specific technical meaning in the Undertaking.

(5) The term target expenditure includes Target Capital Expenditure plusthe forecast operating expenditure for that year based on the agreed budget.

(6) The target return of capital includes an amount for depreciation on theOpening Capital Asset value. The Undertaking requires that the amount ofdepreciation allowed in the different access periods should be consistentwith the straight line depreciation of the Capital Asset Value over 12 years.



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(7) The target return on assets is determined by the Opening Capital Assetvalue in an access period multiplied by the real post tax weighted averagecost of capital (WACC). The Opening Capital Asset value in any accessperiod refers to the amount of the Capital Asset value at the beginning ofthat access period.

(8) In the initial access period, the Opening Capital Access value is equal tothe Initial Capital Asset value. The Initial Capital Asset value is simply thedifference between the capitalised actual expenditure less the capitalisedactual revenue in the first access period.

(9) In subsequent access periods, the Opening Capital Asset value will bedetermined according to a formula which takes the Opening Capital Assetvalue of the previous period and adds to it the actual expenditure in theprevious period. It then deducts the target level of revenue in the previousperiod, as well as any revenue earned from capital disposals or from

excluded products in the previous period. In addition, any differencebetween actual and estimated expenditure in the access period two periodsbefore the current one is added to the Opening Capital Asset value. Finally,any difference between actual and estimated revenue in the first accessperiod is also added to the Opening Capital Asset value.

(10)It is proposed that the real post-tax WACC to be applied to the OpeningCapital Asset value be determined according to a methodology whichprovides for a return on debt and a return on equity.

(11)A unique feature of the WACC methodology outlined in the Undertaking isthat it proposes that in estimating the return on equity, the value of theequity beta be set at the lower of either 1.0, or, a value derived through acapital raising auction.

(12)In respect of a number of parameters in the pricing methodology such asestimated or quantities for existing and new products the Undertakingoutlines a process for determining their values. This involves an initialprocess of negotiation between FANOC and the BAS manager, and failingthat, allows for either the ACCC or an independent reviewer to determinethe values of these parameters in specific circumstances.

3.3.2.1. Initial period pricesAdding the FANOC estimated pass-through component charge of $5 to $15 to theFANOC component charge for first period, the estimated maximum all-inclusiveprices in the first access period are:

$15 - 25 per month for a basic telephone access service $19.23 - 29.23 per month for a 1.5 Mbps broadband service (including basic

telephone access for voice)



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$23.46 33.46 per month for a 6 Mbps broadband service (including basictelephone access for voice)

$31.92 - 41.92 per month for a 12 Mbps broadband service (including basictelephone access for voice)

$40.38 - 50.38 per month for an unlimited broadband service (includingbasic telephone access for voice).

3.3.3. Addition/withdrawal of BAS productsThe pricing method includes a provision which allows for the addition of new BASproducts in an access period. Specifically, at the beginning of each access period if anew product is likely to be introduced during that period, then the allowed revenuewill include the expected revenue from that product, plus an adjustment whichaccounts for the impact of the introduction of the new BAS product on the demandfor existing BAS services. In these circumstances, the BAS Manager will assess this

volume sold of the new product - and the expected impact on existing products - onthe basis of its understanding of what might have happened to volumes had the newproduct existed in the period just past. Should any disagreement arise on this issuebetween FANOC and the BAS manager then the issue will be put to theIndependent Reviewer or the ACCC.

In addition, where BAS products are introduced or withdrawn during an accessperiod this will impact on the assumed weighted average of forecast sales used indetermining the appropriate target revenue requirement for that access period. Insuch circumstances, the weighted average of forecast sales will need to be agreed byFANOC and the BAS Manager. Again should a dispute arise, then it is proposed

that this value be determined by an independent reviewer or the ACCC.

3.3.4. Prices for basic telephone servicesThe Undertaking notes that because certain basic telephony services are subject tosocial obligations (such as the retail price controls on basic line rental), that theBasic telephone access service will be required to be provided throughout the termof the Undertaking at the price specified for the first three years, subject only to CPIincreases.

3.3.5 Queries on price-related terms and conditions

The Commission seeks the views of interested parties as to the proposed price termsand conditions with reference to the matters outlined in Appendix 1 to thisDiscussion paper. In particular, the Commission seeks views in relation to thefollowing issues:

1. Do sufficient incentives, and safeguards, exist within the pricing model forthe accurate forecasting of demand and costs? In particular, do such



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incentives and safeguards exist in the second, and subsequent, accessperiods?

2. Do sufficient mechanisms exist in the Undertaking to ensure the quality ofthe BAS products, and the incentives for innovation, are maintained?

3. Is the proposed approach to account for differences between actual andestimated expenditures and actual and estimated revenues in the pricingmethod reasonable?

4. The Undertaking proposes that for the purposes of the estimation of theWACC the value of the equity beta be set at the lower of either 1.0, or avalue as set by a capital raising auction. This raises a number of specificissues:

i. Is an either/or approach to the estimation of the equity betaappropriate in these circumstances?

ii.

Is a capital raising auction as proposed considered an appropriateapproach for estimating the cost of equity?iii. Does a predetermined maximum equity beta of 1.0 appear reasonable

for such an Undertaking?iv. How should the proposed capital raising auction be structured? Are

there any specific elements that are considered necessary to beincorporated into the auction design? (auction floor, limit on numberof bidders, allowance for multiple bids, defined size of incrementsetc.)

v. Are there relevant examples of such an auction process being used todetermine the return on equity?

5. What should the terms of reference be for the independent reviewer or theACCC in arbitrating disputes between FANOC and the BAS manager? Whatfactors should be considered by the independent reviewer or the ACCC inmaking a determination? How should the process involving such adetermination be conducted?



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3.4. Non-price terms and conditionsThe Undertaking includes provision relating to non-price terms and conditionsunder which FANOC will provide access to the BAS. Specifically:

Transitional arrangements and roll-out;

Equality of access to information; and Additional terms to be negotiated between FANOC and Access Seekers.

3.4.1. Transitional arrangements and roll-outThe ACCC notes that the construction of a fibre-to-the-node network is likely torender existing DSLAM investments obsolete, noting that access seekers will nolonger be able to access the local loop from an exchange.

Resellers of existing wholesale products and users of other declared services mayalso in some cases find their current services affected.

It is also important that Australias residential and business end-users receive asseamless a transition to the new network as is reasonably possible.

Thus, the Undertaking proposes that for each customer, or group of customerslinked to a node, there is a one-off transition from the old network to the newupgraded Network, although that one-off transition may occur node by node over aperiod of years during rollout.

Accordingly, appropriate transitional arrangements are essential, including advanceinformation and notification periods to other carriers and carriage service providersaffected by the cut over from existing network to the new Network. The Australian

Competition Tribunal has recently stated in Telstra Corporation Limited (No 3)[2007] ACompT 3:

Some of the network upgrades, such as removal or replacement of the ULLS with fibreoptic cable, or its decommissioning, would require access seekers to plan majorinfrastructure works, or acquire and install new equipment and, in the case of thedecommissioning of the ULLS, the need to market new services to end users. Theseactivities may well take longer to plan, implement and install than the minimum noticeperiod of 15 weeks proposed by [the carrier]. That notice period is also likely to placeaccess seekers at a significant competitive disadvantage with [the carrier] because some of

[the carriers] network upgrades will require more than 15 weeks to plan and carry out.18

Such information and notification arrangements may be dealt with through anundertaking or may be dealt with through Communications Alliance codes and/orACMA standards.

18Telstra Corporation Limited (No 3)[2007] ACompT 3 at para 304



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The Submission acknowledges the importance of transitional arrangements. TheUndertaking does not make any specific provisions for these arrangements. TheSubmission states:

The Undertaking includes an acknowledgement that nothing in this Undertaking detractsfrom any power of the Commission in relation to determining appropriate processes and

procedures to be followed to ensure that the roll-out of the HFTP Network occurs in anappropriate manner that balances the interests of FANOC and end users in an efficientdeployment of the HFTP Network and the provision of BAS Products with the needs andinterests of access seekers and their end users in minimising any disruption orinconvenience to their existing telecommunications networks and telecommunicationsservices.19

3.4.2. Equality of access to informationFollowing rollout and the initial transition, the issue of ongoing equality of access toinformation by all parties using the Network arises.

Clause 9.1 of the Undertaking provides that: FANOC will provide all AccessSeekers with such information as, in FANOCs reasonable opinion, may be requiredin order for Access Seekers to make informed decisions in relation to the usage ofBAS Products. FANOC will provide all Access Seekers that seek such informationwith equivalent information in relation to:

20

(a)The technical and operation parameters of the [] Network;(b)The Deployment Schedule for the [] Network;(c)The BAS Products that are being provided and the current maximum

Total Charges for each of those BAS Products; and(d)Any new BAS Products that have been requested by an Access Seeker.

3.4.3. Additional terms to be negotiated between FANOC and Access SeekersClause 3.2 of the Undertaking notes that the Undertaking does not specify all theterms and conditions on which FANOC will comply with the standard accessobligations.

The Undertaking notes that other terms and conditions are to be proposed byFANOC (in consultation with the BAS Manager). Should an access seeker object toany of these terms and conditions, it can seek a determination from the ACCCacting as arbitrator, under Division 8 of Part XIC of the TPA.

The Act requires that a party giving an SAU agrees to be bound by the standardaccess obligations (the SAOs) to the extent that those obligations would apply ifthe service was treated as a declared service

21. FANOC makes this commitment in

clause 3.1 of the Undertaking.

19at page 3320Clause 9.1 (a) (d)21ss. 152CBA(3)(a)



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Undertakings do not have to be exhaustive to be reasonable and consistent with theSAOs. However, it is open to the ACCC to take the absence of terms andconditions into account in conducting its assessment under ss. 152BV(2).

Typically, other contractual terms are not included in many of the undertakings thatthe ACCC receives, and are left to be determined by commercial negotiation orarbitration. However, the ACCC has published non-price model terms andconditions for access to core services under s. 152AQB of the Act. These modelterms and conditions include provisions relating to billing and notification, liability,confidentiality and service migration and may provide guidance to the ACCC inconducting arbitrations of non-price terms.

The ACCC seeks views of interested parties on the reasonableness, and consistencywith the SAOs, of the non-price related terms and conditions contained within theUndertaking with reference to the matters outlined in Appendix 1 to this Discussion

Paper.

3.5. Management principlesFANOC claims that the separation of the ownership and operation of the Networkwill promote competition and remove any incentives to anti-competitive conductinherent in vertically integrated control.

The Undertaking contains a number of management principles which FANOC claimwill maintain the separation of control and promote competition. Thesemanagement principles are set out in part 4 of the Undertaking and may be

summarised as: FANOC will only serve wholesale customers No carrier (or group of carriers acting in concert) can be in a position to

control FANOC.

No discrimination by FANOC against an access seeker on the basis ofwhether the access seeker is an investor in FANOC.

No carrier control of the BAS Manager. All access seekers will be entitled to be members of the BAS Manager. The BAS Manager Board will include both representatives of carriers and

independent directors.

FANOC and the BAS Manager will enter into a Management Agreementunder which the BAS Manager is allocated key operational functions inrespect of the FTTN Network.



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FANOC argues that as FANOC will only provide wholesale services and isprohibited from discriminating between access seekers on the basis of their financialinterest in FANOC, it will be motivated to maximise the utilisation of the Network.

The Submission states that the primary purpose of the BAS Manager is:

to facilitate a degree of separation between the funding and ownership of theNetwork and its day to day operations; and

to provide access seekers with a degree of oversight of the costs incurred bythe access provider (since any inefficient costs would be borne by accessseekers in the form of higher charges).

The ACCC seeks views of interested parties on the impact of the managementprinciples on whether the Undertaking is reasonable with reference to the mattersoutlined in Appendix 1 to this Discussion Paper.

Normally, specific undertaking provisions can be directly enforced in the FederalCourt. The management principles set out in the Undertaking are general principleswhich may be less amenable to direct Court enforcement. The Undertaking statesthat FANOC recognises that compliance with the management principles is materialto the ACCCs consideration of whether the Undertaking is reasonable, which mighton the face of it, suggest that if the management principles are not followed theUndertaking could be revoked.

However, the ACCC is normally unable of its own initiative to vary or revoke aspecial access undertaking once accepted, even if it considers that due to a change

in circumstances the undertaking is no longer reasonable.

22

Such a mechanismensures regulatory certainty for investors.

To provide assurances for access seekers that the principles set out in theUndertaking will be followed, the Undertaking itself provides that the ACCC canissue FANOC with a rectification notice and that FANOC can be required towithdraw or vary the Undertaking, if this governance structure is not implementedand maintained to the satisfaction of the ACCC after the date FANOC first suppliesa BAS within Australia.

Clauses 4.3 to 4.6 of the Undertaking outline a mechanism for ensuring that

FANOC and the BAS Manager comply with the management principles in theUndertaking. These mechanisms include a process of variance and rectification

22Sections 152CBI & 152CBG of the Act provide an explicit power for the person who has given aspecial access undertaking to withdraw it, or propose a variation to it. There is no correspondingpower in the Act for the ACCC to decide to revoke a special access undertaking or require avariation. Section 33 of theActs Interpretation Act 1901allows a decision-maker making anInstrument to subsequently revoke or vary that Instrument, but as a decision to accept a specialaccess undertaking is not the making of an Instrument, that rule does not apply here.



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notices with the effect that if the management principles are contravened FANOCmust:

rectify its compliance; give additional undertakings to the ACCC to satisfy the ACCC of the

continued reasonableness of the Undertaking; or withdraw the Undertaking.As withdrawal of the Undertaking requires the giving of 12 months notice, clause4.6 provides for FANOC to comply with any additional undertakings that theACCC requires to satisfy itself of the continued reasonableness of the Undertakingduring the period once withdrawal has been notified.

The ACCC seeks views of interested parties on whether the proposed mechanismsfor enforcing compliance with the corporate governance and management principlesare effective?

3.6. Expiry date and the term of the UndertakingIf the ACCC accepts the Undertaking, it will commence operation from the date ofacceptance by the ACCC and will continue until the earlier of:

17 years from the acceptance date; 15 years from the date FANOC first supplies a Broadband Access Service

within Australia; or termination, withdrawal or replacement of the Undertaking in accordance

with the Act.

The ACCC seeks views of interested parties on whether the term of the Undertakingis reasonable.

3.7. FANOCs Submission in support of the UndertakingAs noted above FANOC has provided a Submission in support of the Undertakingto the ACCC. The Submission outlines the main provisions of the Undertaking aswell as detailing the reasons why FANOC considers the Undertaking satisfies therelevant statutory criteria.23In this regard, FANOC claims that the prices and non-

price terms and conditions of the Undertaking are consistent with FANOCs SAOsunder the Act and reasonable. FANOC submits that the Undertaking:

promotes competition in retail service markets because FANOC will not provideretail services and will provide non-discriminatory access to downstreamsuppliers of retail services;

23Refer to section 7 of the Submission



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is in the long-term interests of end users; allows FANOC to recover the costs of its efficient investment in the

Network(but no more) and earn a normal return on its investment;

promotes efficient use of infrastructure; balances FANOCs legitimate business interests with the interests of accessseekers; and the pricing model enables FANOC to maintain the safety and reliability of the

Network and encourages the economically efficient operation of services.

The ACCC seeks views of interested parties on any of the arguments presented inthe Submission and related schedules in support of FANOCs claim that the priceand non-price terms and conditions in the Undertaking are reasonable and consistentwith the SAOs.



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4.The legislative criteria for the assessment ofundertakings

Division 5 of Part XIC of the Act enables access providers to voluntarily lodge

written access undertakings with the ACCC specifying the terms and conditionsupon which they agree to supply a specified service.

Under s.152CBA of the Act a special access undertaking can be lodged by a personwho is, or expects to be, a carrier or a carriage service provider, so long as theservice is not an active declared service.

Section 152CBD of the Act specifies that the ACCC must not accept the specialaccess undertaking unless:

the ACCC is satisfied that the terms and conditions set out in the undertakingare consistent with the standard access obligations ( the SAOs) unders.152AR;

the ACCC is satisfied that the terms and conditions set out in the undertakingare reasonable;

the ACCC is satisfied that the undertaking is consistent with any Ministerialpricing determination; and

the ACCC has: published the undertaking and invited people to make submissions to the

ACCC on the undertaking; and

considered any submissions that were received within the time limitspecified by the ACCC when it published the undertaking.

A service supplied by a person who has given the ACCC a special accessundertaking and which the ACCC has accepted, is a declared service unders.152AL(7) of the Act.24However, the ACCC may still declare a service unders.152AL(3) even if the service is covered by a special access undertaking.

24Under Part XIC of the Act, the ACCC may declare carriage services and related services to bedeclared services. Carriers and carriage service providers who provide declared services are requiredto comply with standard access obligations (SAOs) in relation to those services. The SAOsfacilitate the supply of declared services by access providers to access seekers, in order that accessseekers can provide carriage services and/or content services.



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4.1. Publication of undertakings and invitation to makesubmissions

The ACCC published the Undertaking and accompanying cover letter on its websiteat www.accc.gov.au, on 30 May, and 31 May 2007 respectively, and invites

submissions to be made within six weeks from the date of publication of thisDiscussion Paper (that is, by5pm, 7 August 2007).

4.2. Consistency with standard access obligationsThe SAOs are set out in s.152AR of the Act. Subject to class or individualexemptions made by the ACCC, a carrier or carriage service provider must complywith the SAOs in regard to declared services it supplies either to itself or to otherpersons.25 In particular, s.152AR requires access providers to, among other things:

supply an active declared service if requested to do so by a service provider(subject to certain limitations) and to take all reasonable steps to ensure thatthe technical and operational quality of the active declared service supplied tothe service provider is equivalent to that which the access provider providesto itself;

take all reasonable steps to ensure that the service provider receives, inrelation to the active declared service supplied to the service provider, faultdetection, handling and rectification of a technical and operational qualityand timing that is equivalent to that which the access provider provides toitself;

if an access provider supplies an active declared service by means ofconditional-access customer equipment, the access provider must, ifrequested to do so by a service provider, supply to the service provider anyservice that is necessary to enable the service provider to supply carriageservices and/or content services by means of the active declared service andusing the equipment;

permit the interconnection of the facilities an access provider either owns,controls or is responsible for, with the facilities of a service provider for thepurpose of enabling the service provider to be supplied with active declaredservices; and

provide billing information (if requested by the service provider) at certainintervals and in a certain manner and form.

The ACCC will assess whether the Undertaking is consistent with the SAOs.

25Refer to ss.152AS and 152AT of the Act.



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4.3. Reasonable terms and conditionsUnder Part XIC of the Act, the ACCC cannot accept an undertaking unless it issatisfied that the terms and conditions specified are reasonable. In determiningwhether terms and conditions are reasonable, the ACCC must have regard to the

following matters: whether the terms and conditions promote the long-term interests of end-

users (the LTIE);

the legitimate business interests of the carrier or carriage service providerconcerned, and the carriers or carriage service providers investment infacilities used to supply the declared service concerned;

the interests of persons who have rights to use the declared serviceconcerned;

the direct costs of providing access to the declared service concerned; the operational and technical requirements necessary for the safe and reliableoperation of a carriage service, a telecommunications network or a facility;

and

the economically efficient operation of a carriage service, atelecommunications network or a facility.26

This does not, by implication, limit the matters to which regard may be had.27

In considering whether the terms of an access undertaking promote the LTIE, theACCC must consider the achievement of the following objectives:

promoting competition in markets for telecommunications services;

achieving any-to-any connectivity in relation to carriage services that involve communication between end-users; and the objective of encouraging the economically efficient use of, and

economically efficient investment in: the infrastructure by which listed carriage services are supplied; and any other infrastructure by which listed services are, or are likely to

become, capable of being supplied.28

4.4. Consistency with Ministerial pricing determinationDivision 6 of Part XIC of the Act provides that the Minister can make a writtendetermination setting out principles dealing with price or a method of ascertaining

26 Refer to sub-section 152AH(1) of the Act.27 Section 152AH(2) of the Act.28 Section 152AB(2) of the Act.



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price relating to the SAOs. Subsection 152CI(1) of the Act provides that if aprovision of an access undertaking is inconsistent with any Ministerial pricingdetermination, the provision will have no effect to the extent of the inconsistency.

The Minister has not made a pricing determination in relation to the BAS.



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5.The ACCCs process for assessing the UndertakingThe process the ACCC will follow to assess the Undertaking will be as open and

public as practicable allowing parties to express their views on the Undertaking,provide relevant information to assist the ACCC and allow comment on preliminaryviews formed by the ACCC and its analysis of the Undertaking.

5.1. ProcessThe ACCC intends to adopt the following process in assessing FANOCsUndertaking.

Stage 1: Lodgement of Undertaking

The application given to the ACCC by FANOC on 30 May 2007 consists of:

covering letter from Clayton Utz, on behalf of FANOC, dated 30 May 2007; FANOCs Undertaking; and FANOCs Submission. The Submission includes the following Schedules:

Schedule 1 Regulatory Framework; Schedule 2 Example BAS Product Specifications; Schedule 3 Initial BAS Pricing Calculation; Schedule 4 NERA Paper; and Schedule 5 Request to Government for legislative change to

facilitate the connection of FANOC nodes to Telstra pillars

On 30 May 2007, the ACCC placed the Undertaking on its website. The coveringletter and Submission were placed on the ACCC website on 31 May 2007.

Stage 2: Publish the Undertaking and seek submissions

As stated in section 5.1 above, the Undertaking was published by the ACCC on 30May 2007. This Discussion Paper was released on 21 June 2007. The DiscussionPaper aims to inform parties of the matters the ACCC must take into considerationin assessing the Undertaking, and the issues which the ACCC would particularlylike addressed in submissions.

This Discussion Paper is available on the ACCCs web site at www.accc.gov.au.

Submissions are due by 5pm, 7 August 2007. While the ACCC will, as required,have regard to all submissions that are made to it on or before the closing date forsubmissions, the ACCC strongly encourages all interested parties to make theirsubmissions as soon as they are in a position to do so. In particular, the ACCCrequests that should a party intend to make a submission on any matter not

http://www.accc.gov.au/http://www.accc.gov.au/


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addressed in this Discussion Paper, it notify the ACCC of its intentions as soon aspossible.

As noted, the ACCC also encourages parties to make their submissions in a waythat facilitates the efficient assessment of its various contentions, including the

verification of any facts or data upon which those contentions are based. In thisregard, parties are encouraged to restrict confidentiality claims to a minimum and toestablish appropriate confidentiality regimes for the disclosure of any informationthat is claimed to be confidential to interested parties or to others to allow theircritical assessment.

Accordingly, the ACCC would recommend that should a party intend to provideconfidential material in support of a submission, that it now put in place pro formadocumentation (a confidentiality undertaking and procedure for responding torequests) to facilitate the prompt disclosure of that information to appropriate thirdparties.

Should the ACCC not be in a position to efficiently assess a partys contentions,including by receiving the results of independent critical assessments of them, itwill be necessarily constrained in the weight to which it will be able to attach tothose contentions. This will particularly be the case where conflicting material isbefore the ACCC that has been critically assessed.

Stage 3: Publish draft assessment and seek further submissions

Following its analysis of the Undertaking and the submissions of interested parties,the ACCC intends to publish the findings of its initial analysis and its draft decisionwithin a reasonable period after submissions close. The ACCC will invite further

submissions on its draft decision.

The ACCC would expect that these submissions would be responsive to the draftdecision, and would not expect a party to raise any further issues that were notaddressed in the submissions that the party made during Stage 2 as discussed above.

Stage 4: Publish final assessment

Taking into account the submissions, the ACCC will form a view on whether toaccept or reject the Undertaking, and publish the reasons for its decision.

The date by which this decision must be made will be notified on the ACCCs

website.

5.2. ConfidentialityIn general, the ACCC is of a view that all information and submissions it proposesto take into account in assessing the Undertaking should be publicly disclosed. Thisenables persons with an interest in the Undertaking to comment on matters affectingtheir interests, and enables the ACCC to test the veracity of the information. As



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noted above, parties are encouraged to restrict confidentiality claims to a minimumand to establish appropriate confidentiality regimes where necessary.

However, the ACCC is aware of the need to protect certain of FANOCsinformation where disclosure of such information may harm FANOCs legitimate

commercial interests. Therefore, in order to balance the possible harm fromdisclosure and the harm that interested persons may suffer if they are unable tocomment on matters affecting their interests, the ACCC considers that a morelimited form of disclosure may be appropriate. For example, FANOC may requirethat parties who wish to have access to confidential information sign confidentialityundertakings.

In this regard, the ACCC believes that such confidentiality undertakings shouldenable the relevant party to view all information supplied by FANOC to the ACCCin these proceedings. Should FANOC choose not to supply any confidentialinformation to parties who wish to have access to it, the ACCC may decide to give

lesser weight to such information if it is not available to parties who have an interestin it, and the veracity of it can not be tested by the ACCC to its satisfaction.

5.3. Time limit for assessmentThe Act imposes a time limit for the ACCCs assessment of undertakings. Whilethe ACCC intends to make its decision as soon as it is practicable to do so, theACCC must in any event make a decision within six months of lodgement of anundertaking with the ACCC. If the ACCC does not do so, it is deemed to haveaccepted the undertaking.

The ACCC may also extend the decision-making period by an additional threemonths but must provide a written notice to the carrier or service provider whichincludes a statement explaining why the ACCC has been unable to make a decisionon the undertaking within the six-month period. In addition, if the ACCC requestsfurther information in relation to the undertaking, the time taken for the ACCC toreceive the information is excluded from the six-month period. Similarly, anyconsultation period specified by the ACCC is excluded from this timeframe.29

29 See subsections 152BU (5), (6) & (7)



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Appendix 1 - Submission Template

Assessment of FANOCs special access undertaking in relation

toBroadband Access Service (BAS)

Lodged under Division 5 Part XIC of the Trade Practices Act 1974(the Act)

on 30 May 2007

SUBMISSIONS LODGED BY THE [Insert Name of party making the submissions]pursuant to the Discussion Paperreleased by the ACCC on21June 2007.

Matters to be specifically addressed by party

1. Submission on the consistency with standard access obligations - section152BV(2)(b) of the Act

[Parties should address whether the Undertaking is consistent with applicable standard

access obligations]

2. Submission on reasonableness of the terms and conditions contained theUndertaking - section 152BV(2)(d) and section 152AH(1) of the Act

[Matters which the ACCC must take into account in considering the reasonableness of

the terms and conditions contained in the Undertaking.]

(a) Whether the terms and conditions promote the long-term interests of end-users (LTIE)

[Insert submission]

(b) Legitimate business interests of the access provider[Insert submission]

(c) The interests of the persons who have rights to use the declared service[Insert submission]

(d) The direct costs of providing access to the declared service[Insert submission]

Submission in relation to FANOC Special Access Undertaking


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(e) The operational and technical requirements necessary for the safe and reliableoperation of a carriage service, a telecommunications network or facility

[Insert submission]

(f) The economically efficient operation of a carriage service, atelecommunications network or a facility

[Insert submission]

Other Relevant Matters section 152AH(2)

[At its discretion, the ACCC may take into account any other matters relevant in

assessing the reasonableness of the Undertaking]

accc discussion paper about fanoc sau - 21 jun 07

Documents