Regulatory Observer, Issue 41, 14 August 2012
Contents
FCC Commissioner Proposes to Remove
Investment Barriers
Australian Regulatory Round-up
1
International Regulatory Round-up
2
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FCC COMMISSIONER PROPOSES TO REMOVE INVESTMENT BARRIERS
Commissioner Ajit Pai of the US Federal Communications Commission (FCC) has called for the
modernisation of the FCC’s approach to regulation, in a recent speech at the Carnegie Mellon University
in Pittsburgh, Pennsylvania. This includes removing regulatory barriers to technological innovation and
infrastructure investment in the information and communications technology sector.
Commissioner Pai identified three principles that he said should guide the FCC and promote investment,
innovation and employment in the sector. First, the FCC should ‘be as nimble as the industry that [it]
oversee[s]’. That is, the FCC should become more agile, to match the acceleration in the pace of private
sector innovation. Regulatory decisions should be made in a timely manner. Proposals include:
introducing a six-month deadline to act on requests for a waiver of the FCC’s rules; a nine-month
deadline to respond to requests for a review of earlier decisions; and a one-year deadline to review
proposals for the introduction of new technologies and services. A centralised webpage should be
established to more easily provide information on the status of all petitions, and list the FCC’s deadline to
respond to each petition.
The second principle is the removal of regulatory barriers to invest in modern communications
infrastructure. Estimates suggest that between 15,000 and 20,000 new jobs are created for every $1
billion spent on fibre deployment. It is suggested that capital expenditure is lagging because of
regulatory uncertainty in IP networks. It is proposed that an IP Transition Task Force be established that
develops recommendations to regulate IP networks.
The third principle proposed by Commissioner Pai to promote innovation, investment and employment in
the sector is to accelerate FCC efforts to allocate additional spectrum for mobile broadband. This
includes finalising rules for incentive auctions by November 2012, and conducting auctions by June 30,
2014.
The FCC is directed by five commissioners. Commissioner Ajit Pai was sworn in on 14 May 2012 after
being nominated by President Barack Obama and unanimously confirmed by the US Senate.
1
Communications
application store operator block Verizon’s
customers
from
accessing
tethering
applications. ‘Tethering’ is using a wireless
handset as a modem to obtain Internet access
for another device, such as a laptop computer or
tablet.
Americas
Europe
US: Rural Communities in 37 US States to
Access High-Speed Internet within Three
Years
EU: The BEREC Releases Consultation on
Wholesale Roaming Provisions
INTERNATIONAL
ROUND-UP
REGULATORY
The BEREC has launched a public consultation
on a draft document into wholesale roaming
access provisions. Article 3 of the new Roaming
Regulations provides that mobile network
operators (MNOs) must meet all reasonable
requests for wholesale roaming access. This
includes direct wholesale roaming access and
wholesale roaming resale access. The
consultation discusses the guidance which the
BEREC is required to publish under the
regulation relating to the operation of Article 3.
The consultation closes on 10 August 2012.
The FCC has announced that nearly 400,000
residents and small business owners in 37
states will gain access to high-speed Internet
within three years, as a result of the first phase
of the ‘Connect America Fund.’ About $115
million of public funding will be coupled with tens
of millions of dollars of private investment to
expand broadband infrastructure to rural
communities. Many projects will begin
immediately. All projects will be completed
within three years. The ‘Connect America Fund’
aims to connect seven million unserved rural
Americans to broadband in six years, and
connect 19 million residents by 2020.
Germany: The Bundesnetzagentur Assists
at the London 2012 Olympic Games
In
a
recent
press
release,
the
Bundesnetzagentur has announced that it
assisted the UK’s Ofcom with the Opening
Ceremony of the London 2012 Olympic Games.
A large number of frequencies require
coordination in order to cover major sporting
events. This includes the use of wireless
cameras and microphones and frequencies to
facilitate communication between employees
and also between the judges. Frequencies also
need to be coordinated for global transmission
via satellite. Work will also ensure interference
does not occur with radio services used by the
emergency services and security authorities.
US: Verizon Wireless to Pay $1.25 Million
to Settle Investigation into Blocking Of
Consumers’ Access to Certain Mobile
Broadband
The FCC’s Enforcement Bureau has released a
$1.25 million consent decree with Verizon
Wireless that resolves an investigation into
whether Verizon Wireless had complied with the
FCC’s ‘C Block rules’ (the Rules). The Rules
require licensees of C Block spectrum to allow
customers to freely use devices and applications
to obtain Internet access.
Verizon Wireless
offers customers 4G LTE services on C Block
spectrum. The FCC launched an investigation
after reports suggested that Verizon Wireless
had successfully requested that a major
UK: The Ofcom Unveils Plans for 4G
Auction
2
The Ofcom has released a consultation on the
auction of spectrum for mobile services in the
UK. The auction will offer the equivalent of three
quarters of the mobile spectrum in use today.
This is 80 per cent more spectrum than was
released in the 3G auction which took place in
2000. This is expected to ensure that mobile
broadband is available to at least 98 per cent of
people in villages, towns and cities across the
UK. The Ofcom will reserve some spectrum for a
fourth national wholesaler, in addition to the
three current large mobile operators.
The
Ofcom has released a consultation on the draft
of the legal instrument which implements the
auction rules. The consultation closes on 11
September 2012.
per cent for text messages. During this time, a
new supplier entered the market.
NZ:
Statement of Preliminary Issues
Available
for
Vodafone/TelstraClear
Clearance Application
The NZCC has published a statement of
preliminary issues relating to an application from
Vodafone New Zealand Limited seeking
clearance to acquire 100 per cent of
TelstraClear New Zealand Limited.
The
statement of preliminary issues outlines the key
competition issues that the NZCC considers will
be important in deciding whether to grant
clearance. Submissions close on 13 August
2012.
Oceania
Energy
NZ: Telecom’s $12 million Penalty Upheld
Americas
In a recent decision, the New Zealand Court of
Appeal has upheld a $12 million penalty
imposed against Telecom for breaching the
Commerce Act. The Court of Appeal found that
from February 1999 to late 2004 Telecom took
advantage of its market power to charge
downstream competitors disproportionately high
prices for wholesale access to its network. This
prevented competitors from offering retail endto-end high-speed data transmission services at
a competitive price. Telecom may seek leave
to appeal to the Supreme Court against the
Court of Appeal’s findings.
US: The BOEM and the FERC Revise
Guidelines for Development of Wave
Energy and Ocean Current Technologies in
US Waters
The Bureau of Ocean Energy Management
(BOEM) and the Federal Energy Regulatory
Commission (FERC) have released revised
guidelines for marine hydrokinetic energy
developers pursuing technology testing and
commercial development activities on the US’s
Outer Continental Shelf (OCS). The guidelines
provide information about how best to obtain a
marine hydrokinetic lease and licence on the
OCS. The guidelines include topics such as:
provisions for obtaining leases and licences; fee
structures; and considerations relevant to hybrid
(wind and marine hydrokinetic) projects. The
guidelines were developed as part of a
Memorandum of Understanding between the
Department of the Interior and the FERC.
NZ: Monitoring Report Released
The New Zealand Commerce Commission’s
(NZCC’s) fourth mobile monitoring report shows
a decrease in the difference between the price
of calling and texting on the same
telecommunications network compared to calling
and texting between networks.
Between
February and April 2012, cross-network traffic
increased 1.4 per cent for mobile calls and 1.6
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countries are not always based on defined and
published criteria.
US: The FERC Proposes Policy Reforms
on Capacity Allocation for Merchant
Transmission Projects
Finland: Road Map 2020 Project Report
Released
The FERC has released a proposal to amend
policies governing capacity allocation for new
merchant transmission projects. The proposal
also applies to new non-incumbent, cost-based
transmission projects that are participantfunded. Proposed amendments include allowing
developers to negotiate with customers on key
terms and conditions for obtaining transmission
capacity. Currently, the FERC reviews requests
from merchant transmission developers before
interest can be solicited from customers. Only a
portion of a project’s capacity may be subject to
negotiations. The remainder must be offered
through an open season. Under the proposals,
a developer of a new merchant transmission
project or a new non-incumbent, cost-based,
participant-funded transmission project may
allocate up to 100 per cent of the project’s
capacity
through
bilateral
negotiations.
Comments are due 60 days after publication in
the Federal Register.
The Finnish Energy Market Authority has
released the Final Report of the Roadmap 2020
project (the Project). The Project examined the
operating environment of electricity network
operations in Finland. It also examined future
challenges of network regulation. The objective
of the project was to draw up a development
strategy for the regulation of the reasonableness
of pricing in electricity distribution network
operations until 2020.
France:
CRE Publishes Report on
Monitoring of Good Practices Programs
and Independence for Electricity and
Natural Gas System Operators
The French Energy Regulatory Commission
(CRE) has published a Final Report into the
monitoring of good practices programs and
independence for electricity and natural gas
transmission system operators (TSO) and
distribution system operators (DSO). French
law requires that TSOs and DSOs are
independent from suppliers or producers that
belong to the same integrated group. They also
have non-discriminatory obligations.
For
example, they must develop a good practices
program which includes a range of measures to
prevent the risk of discriminatory practices in
network access.
Europe
EU:
The CEER Releases Monitoring
Report Gas Storage Access Regimes
The CEER has released a Report into the status
of different gas storage access regimes
throughout the EU, as provided by Article 33 of
Directive 2009/73/EC. Access to gas storage is
necessary for suppliers in the gas market. The
report identifies different criteria throughout the
EU that are used to determine the access
regimes. The report can be used on a national
level to compare approaches in Europe. The
report notes that the regimes in different
Germany: Study into Reliability of German
Gas Network
The Bundesnetzagentur has released a study
into the reliability of gas supplies in Germany in
2011. The study suggests that the average
interruption in gas supplies per final customer
(the System Average Interruption Duration Index
4
(SAIDI)) was 1.993 minutes.
That is, on
average,
each
consumer
experienced
interrupted supply for about two minutes in total
last year. The study suggests that incentive
regulation, which was introduced in 2009, has
not impaired the quality of supply in the gas
network. The SAIDI only reflects unplanned
interruptions which are due to action taken by
third parties, which are caused by other
networks or which are due to other faults for
which network operators are responsible.
the transmission and distribution business of
Northern Ireland Electricity Limited (NIE T&D) to
determine whether outperformance had resulted
from a change in capitalisation practice. A
consultant auditor’s interim report suggests that
a change in capitalisation practice has resulted
in a material ‘double payment’ by consumers.
However, NIE T&D has not yet confirmed the
factual accuracy of the interim report, and the
issue has not yet been formally discussed with
NIE T&D. The auditor’s final report will be
published together with a draft determination on
the matter.
Responses to the draft
determination will be invited.
Italy: Energy Authority’s Strategic Three
Year Plan Focuses on Selective Investment
The Italian Regulatory Authority for Electricity
and Gas (the Regulator) has released a Three
Year Plan that focuses on selective
development of infrastructure and implementing
reforms needed for the transition to a new type
of electrical power wholesale market. As well as
identifying the main objectives that will guide the
Regulator in electric power, gas, and now water,
the guidelines also aim to be a starting point
towards defining a national energy strategy.
UK:
The
Reports
DEEC
Releases
Electricity
The UK Department of Energy and Climate
Change (the DEEC) has published two reports
that examine the UK’s electricity system. The
first report is a response to a consultation on
transmission licences. It found that changes to
the regulatory regime on constraints could save
up to £300 million between 2012 and 2017. The
second report examined electricity demand in
the UK.
It identified potential for greater
efficiency in the use of electricity.
Northern Ireland:
Utility Regulator
Comments
on
the
Competition
Commission’s Provisional Determination
UK: The Ofgem Consults on £22 Billion
Investment Plans to Upgrade Britain’s Gas
and High Voltage Electricity Networks
The Utility Regulator has announced that it
welcomes the UK Competition Commission’s
(the Commission’s) provisional determination
of the price control on Phoenix Natural Gas
Limited. The Utility Regulator noted that the
Commission broadly endorsed its position on
deferred capex for pipes that were not built.
This decision will result in almost £14 million
being returned to current and future natural gas
consumers.
The Ofgem has published a consultation on
proposals to upgrade Britain’s electricity and gas
networks. This includes funding £17 billion of
investment with around a further £5 billion
potentially available over the course of the pricecontrol period.
The proposed investment
includes an upgrade and renewal of the high
voltage electricity network in England and Wales
and the high pressure gas networks across
Britain. Proposed infrastructure projects include
installing new sub-sea electricity cables that will
Northern Ireland: Update on Investigation
of Changes to Capitalisation Practice
The Utility Regulator has released an interim
report into an investigation into the accounts of
5
link England and Wales with Scotland. The
consultation closes on 21 September 2012.
Post
Europe
Rail
UK:
The Ofcom Extends Royal Mail
Safeguard Cap to Protect Vulnerable
Consumers
Europe
UK: Regulator Sets Out Network Rail’s
Finance and Output Frameworks for 20142019
The Ofcom has announced that it has
introduced a cap on the prices that Royal Mail
can charge for Second Class stamps for large
letters and small parcels. The cap applies to
Second Class stamps for letters, large letters
and small parcels up to 2kg. The measures are
designed to protect small businesses and
vulnerable consumers. The announcement
follows the Ofcom’s March 2012 decision on the
new regulatory framework for postal services
that otherwise allows Royal Mail greater
commercial freedom in the way it sets prices.
The Office of Rail Regulation (ORR) has
launched consultations in relation to Network
Rail’s financial and output frameworks between
2014 and 2019. The consultations seek views
on issues that include the level of Network Rail’s
debt, and its exposure to changes in inflation.
Other issues include levels of punctuality and
safety, and the efficient management of the rail
network’s assets.
UK: The Ofcom Consults on Royal Mail’s
‘Delivery to Neighbour’ Scheme
UK: Joint Regulators Group Statement on
Cost Benefit Analysis Methodology
The Ofcom has published a consultation in
relation to a proposal to allow Royal Mail to
implement its ‘delivery to neighbour’ scheme
(the Scheme) across the UK. This follows
limited trials of the Scheme in late 2011. Under
the Scheme, Royal Mail could leave mail items
with a neighbour in the event that consumers
are not in to receive them. That is, the proposal
is designed to offer consumers greater choice
for receiving mail when they are not at home. At
present, Royal Mail is the only major UK postal
operator currently not permitted to deliver to a
neighbour.
The consultation closes on 24
August 2012.
The Joint Regulators Group (JRG) has
published a statement on the methodology used
for discounting for cost-benefit analyses (CBAs).
CBAs may be used by regulators when
considering how to compare measurements of
consumer or wider public benefits with costs
incurred by firms, including regulated firms.
That is, CBAs enable regulators to estimate the
value of the overall net benefits of a proposed
regulatory intervention. The members of the
JRB are: the Office of Rail Regulation (ORR);
the Civil Aviation Authority (CAA); the Office of
Gas and Electricity Markets (Ofgem); the Utility
Regulator, Northern Ireland; the Office of Water
Services (Ofwat); the NHS Monitor; the Office of
Fair
Trading
(OFT);
the
Office
of
Communications
(Ofcom);
the
Water
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Final Determination Made on Cost PassThrough Arrangements for Network Service
Providers
Commission; the Department for Business,
Innovation and Skills; and the Tenant Services
Authority.
AUSTRALIAN
ROUND-UP
The Australian Energy Market Commission
(AEMC) has published a final rule and
associated final rule determination on proposed
amendments to the operation of the cost passthrough provisions for electricity network service
providers. The final rule will provide network
service providers with the opportunity to recover
efficient costs should a pass-through event
occur at any time during a regulatory control
period. The addition of pass-through event
considerations to the National Electricity Rules
(NER) ensures that a cost pass through event is
only available when event avoidance,
mitigation, commercial insurance and selfinsurance are less appropriate.
REGULATORY
Communications
ACCC Invites Comment on List of Points of
Interconnection to the National Broadband
Network
The Australian Competition and Consumer
Commission (ACCC) has issued a consultation
paper on the draft section 151DB list of points of
interconnection (POI) to the National Broadband
Network (NBN). The ACCC and NBN Co have
previously agreed on the locations to be used as
the 121 points of interconnection to the NBN. In
the consultation paper, the ACCC proposes to
set out the general location of each point of
interconnection on the list but keep the actual
street address confidential for security reasons.
Submissions close on 31 August 2012.
Consultation on Rule Change Request
Regarding Market Schedule Variation
Transactions
The AEMC has commenced a consultation on a
rule change request proposed by the Australian
Energy Market Operator (AEMO). The rule
change request relates to an operational aspect
of the Short Term Trading Market (STTM) for
natural gas. The request seeks to allow an
additional category of participants in the STTM
to submit ‘market schedule variations’ to AEMO.
The AEMC has published a consultation paper
on the request to facilitate stakeholder
submissions. The deadline for submissions to
the consultation paper is 16 August 2012.
TPG Undertakes to Release Misled
Customers from ADSL2+ Contracts
The ACCC has announced that TPG customers
that relied upon representations about TPG’s
$29.99 Unlimited ADSL2+ campaign, may now
leave their contracts without penalty after the
Federal Court accepted an undertaking from
TPG. The Federal Court found that TPG’s
campaign conveyed false or misleading
representations. The Federal Court’s orders
included TPG to pay $2 million in civil pecuniary
penalties. TPG has appealed the Federal Court
decision.
Cost Thresholds Review the Regulatory
Investment Test for Transmission
The AER has initiated a review of cost
thresholds associated with the Regulatory
Investment Test for Transmission (RIT-T). The
RIT-T is a cost-benefit test that transmission
companies apply before building electricity
Energy
7
transmission infrastructure. The RIT-T applies
to transmission investment above certain cost
thresholds. The NER requires the AER to
undertake a review of cost thresholds to
ascertain whether changes need to be made.
Submissions close on 21 August 2012.
Access Undertaking accepted by the ACCC in
September 2011, Viterra must replace its first in,
first served capacity allocation system with an
auction system. Further information on Viterra’s
revised auction proposal, the Consultation
Paper and how to make written submissions is
available on the ACCC’s website at
www.accc.gov.au/viterra.
Ports
ACCC Consults Further on Viterra Auction
System for Bulk Wheat Exports
The ACCC has issued a Consultation Paper
seeking submissions on Viterra’s revised
proposed auction system for the use of its port
services for bulk wheat export. Under the
Regulatory Observer is a regular publication of the Australian Competition and Consumer Commission.
For editorial enquiries please contact Jason King ([email protected]), and for mailing list enquiries please contact
Genevieve Pound ([email protected]).
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