NETWORK INDUSTRY REGULATION AND CONVERGENCE IN SERVICE DELIVERY: CHALLENGES FOR SUPPLIERS, USERS AND REGULATORS

Abstract

The Australian Competition and Consumer Commission (ACCC) has competition and fair-trading law responsibility for Australian industries. It has gained regulatory responsibilities for third-party access to telecommunications, soon will become the national regulator of gas pipeline access under a legislated code developed by the jurisdictions and industry working in a common forum, and will progressively become the national regulator of electricity transmission.

This paper describes the ACCC's concept of the term 'efficient incentive regulation', gives examples of government decisions on network industry operations to which it is relevant and describes the general approach the ACCC will take in applying that concept, to encourage competition, innovation, economic investment and fair dealing by suppliers with users.

The paper describes the relevance of the rise of national product markets and convergence in the delivery of telecommunications, electricity and gas services to the types of decisions the ACCC and State-based regulators will have to take and places those decisions in the context of common issues in regulatory reform internationally. Regulatory decisions taken for one network industry may have particular positive effects if the underlying principles flow on to others.

A necessary part of dealing with national industries is the coordination of regulatory effort where Commonwealth and State/Territory regulators are involved. There is the risk in Australia that separation of regulatory powers between jurisdictional and national levels may cause welfare gains to business, customers and the wider community arising from the industry reform process to be lost if there are shortcomings in communications between regulators, duplication of effort or inconsistencies in approach. The paper describes the current division of responsibilities; the potential of the Utility Regulators' Forum to coordinate regulatory effort; and indicates the potential for losses of welfare and economic efficiency if COAG principles of a national approach to regulation are not fully embraced.

The paper discusses the range of tools available to deal with challenges arising from privatisations, from the entry of multinational players to network industries and from the implementation of competition policy reforms, drawing on concerns about network industries raised with the ACCC, and on the ACCC's broader complaints experience. Finally, the paper outlines the reasons for policy-makers to pay particular attention to shaping and bringing light-handed but effective regulation to the areas of the converging network industries where market power remains unconstrained by competition, and for regulators to coordinate their administration of the regulated areas of network industries so that the policy objectives of incentive regulation are realised, resulting in the industry, users and the community sharing in the benefits.