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You are here: AustLII >> Databases >> Journal of Law, Information and Science >> 1999 >> [1999] JlLawInfoSci 9

Bahrij, John --- "Telecommunications Law and the Policy of Universal Services Obligation in Europe, Australia and the United States" [1999] JlLawInfoSci 9; (1999) 10(2) Journal of Law, Information and Science 184

Telecommunications Law and the Policy of Universal Services Obligation in Europe, Australia and the United States

Telecommunications Law and the Policy of Universal Services Obligation in Europe, Australia and the United States

JOHN BAHRIJ^[*]

Abstract

Telecommunications law and policy in Australia, the United States and the European Union amongst other jurisdictions has evolved from a position where the provision of telecommunications services has been monopolised by government owned carriers or a few companies given sanctioned control of the market to a situation where there is active competition in a more deregulated environment. This paper will analyse the development of this trend particularly in regard to ‘liberalisation’^[1] and the concept of ‘universal service obligations’ (USO)^[2], a concept which is often at odds with the promotion of competition in general. It is interesting to compare the various approaches being taken by the jurisdictions in question with regard to the definition and regulation of the USO. It would appear that the same catalysts that have created the need to foster competition in a global market place, such as convergence^[3], are driving the need to advance the USO definition to account for technological developments such the Internet^[4] and digital data transmission. This is even more relevant with the recognition being given to the concept that we are now an ‘information society’ that values information as a commercial commodity that has both economic value and provides the ability for individuals to better their quality of life as telecommunications services are becoming the backbone for the delivery of the information society developments.

Up until fairly recently telecommunications law had followed the general characteristics of law in industrialised countries where specific areas are regulated by a wide variety of legislation and rules. In telecommunications the joint aims have been to regulate players and “provide the degree of coordination necessary for the achievement of national service, in which each subscriber could communicate with each other ”.^[5]

This had often resulted in state run monopolies. For a number of reasons this has changed. As Flynn states:

The improvement of the telecommunications infrastructure and of the telecommunications services is seen as a pre-condition for economic growth. At the same time, the numbers and identities of the firms which constitute the telecommunications system and the structure of industry regulation have been changing rapidly. There is a growing recognition worldwide that telecommunications cannot be viewed as synonymous with a government run monopoly post, telegraph and telephone service.^[6]

Further, whilst telecommunications law traditionally dealt with regulation of the carriage of messages and areas such as broadcasting law dealt with control of content the effects of convergence are blurring the distinctions.^[7] Flynn also points out that telecommunications is growing in importance because of the increased economic value now placed on information.

information is a ‘techno-economic key factor’ an input into a wide range of products and systems which permits a quantum jump in potential productivity in almost all of the economy and creates a wide range of new investment and profit opportunities. Telecommunications has therefore been widely identified by many commentators as one of the industries of the future, as the backbone of the information society.^[8]

The growth of the ‘information society’ is certainly having an impact on telecommunications regulation. Member states of the European Union consider it so economically important that they have agreed to ‘harmonise’ their national laws to liberalise their telecommunication markets.^[9] In the United States and Australia new telecommunications regimes have been implemented that have economic concerns and growth of the telecommunications services industry as key policies.

Competition and Liberalisation

One factor that is pivotal in the telecommunications regimes of the European Union, United States and Australia is the importance of competition in the market place. In Australia the Hilmer Committee recognised that full open competition in many areas was imperative for fostering efficient and productive markets.^[10] In the European Union in 1990 they framed regulations on the desirability of enhancing competition in the telecommunications markets to foster economic growth.^[11] In relation to convergence a number of authors including the Australian Competition and Consumer Council (ACCC) have noted that convergence:

raises challenges to effective competition policy in terms of regulatory ‘bypass’ arising from vertical or horizontal integration into ineffectively-regulated areas, complemented by transfer pricing, and the possibility of safe havens being put in place for incumbents if the policy approach and the manner of regulation is uneven across the different industry sectors.^[12]

There are other reasons though other than economic ones that are driving the liberalisation of telecommunications services. As Hammond states access to telecommunications becomes a variable in the ‘quality of life’ that we are able to lead.

Telecommunications networks and the telephones, computers, televisions and other equipment connected to them have a significant impact on the lives of all of us as individuals, learners, citizens and consumers. Access to these networks increasingly determines the ease with which we can conduct and control financial affairs; pursue an education etc.^[13]

The European Union state in their Communication on Universal Service that they strongly believe that by implementing their liberalisation of telecommunications services they will avoid the development of a ‘two-tiered’ information society divided between those who have access to the new possibilities through advanced telecommunication services and those that lack the access to the services and therefore fail to keep pace with development.^[14]

This concept of ‘access’ has been defined in the European Union Directives and the United States and Australian legislation as the ‘Universal Service Obligation’. On a broad level the European Union has described the USO as:

A defined minimum set of services of specified quality which is available to all users independent of their geographical location and, in the light of specified national conditions, at an affordable price.^[15]

Specifically USO have dealt with what the United States has described as POTS (Plain Old Telephone Services). Unfortunately most countries have not reached 100% coverage even at this basic level and Australia is currently attempting to deal with the issue of coverage to isolated rural users in the wake of the still active issue of the full privatisation of Telstra.^[16] It is this basic level of Universal Service that is also currently being challenged by the development of various new technologies and their convergence.

In Australia the USO is part of the broader issue of Community Service Obligations (CSO) where subsidised services are provided due to the large sparsely inhabited continent we have. In telecommunications the USO has become Australia’s CSO. The then Telecom defined the CSO as:

A CSO arises when a government requires a business enterprise to carry out activities which it would not elect to provide on a commercial basis or which it would only provide commercially at higher prices.^[17]

Boswell noted the conflict between CSO’s and the policy of competition:

National competition policy faces two major obstructions. The first is while business must aim to maximise profits, the government must aim to maximise social or public benefit. The two do not necessarily go hand in hand. That is why, in a country of such geography as Australia, we have community service obligations (CSO’s) and cross-subsidies that may not maximise profits but do deliver equality of price of access by Australian citizens to telephone, mail electricity and so on.^[18]

As stated the member states of the European Union have considered telecommunications liberalisation important enough to be part of the package of Directives they have released to harmonise member states’ laws to encourage economic growth and the creation of a single European Union marketplace. Before the liberalisation process the European telecommunications model was one of public owned monopolies with no trans-continental network.^[19] According to Ungerer this model was inadequate because:

the growing digitization of European telecommunications networks began to transform telecommunications networks into multi-purpose information infrastructures. The opportunities offered by telecommunications networks and services started to extend into markets far beyond the traditional telephone service for which the allocation of exclusive and special rights to the traditional telephone monopolies.. had been intended. As a result.. it could neither be assured that new markets could be developed, nor that new technologies and services offered could be made available to consumers sufficiently rapidly.^[20]

After the adoption of the Single European Act in 1985 the modification of Community Law allowed the European Commission to incorporate telecommunications into its agenda.^[21] In 1986 the European Union began the process of deregulation that initially had been begun by the United Kingdom.^[22] In 1987 the European Commission released their Green Paper on the Development of the Common Market for Telecommunication Services and Equipment to open up the market to competition.^[23] As Huisjes points out this initial step towards liberalisation and harmonisation did not solve the issue of ‘right to access’ for companies attempting to enter the marketplace.

These rights of access comprise, on the one hand, the right to enter the market place in the first place (either licencing and general authorisations or absence of legal constraints) and, on the other hand, the access to the infrastructures and services of the (incumbent) carriers on reasonable conditions (interconnection and universal service).^[24]

This problem of harmonisation was dealt with by the Open Network Provisions (ONP) principle in the ONP Directive in 1990.^[25] As stated in the Preamble the basic assumption of the ONP principle was that access could only be restricted for reasons of general public interest.

Whereas the conditions of open network provisions must not allow for any additional restrictions on the use of the public telecommunications networks and/or public telecommunications networks except those restrictions which may be derived from the exercise of special or exclusive rights granted by Member States and which are compatible with Community Law.^[26]

Whilst the European Union also released another Directive on competition in the telecommunications markets which strongly supported liberalisation^[27] they directly targeted competition issues with a set of guidelines published in 1991 which ensured the application of competition rules in the telecommunications sector.^[28] Flynn points out that the role that the European Commission was now taking was supervisory in terms of the restructuring of the telecommunications markets as they constructed the guidelines to effect trade between member states that could be viewed as anti-competitive.^[29] In France v The Commission the European Court of Justice also confirmed the Commission’s powers to legislate under Article 90 of the EC Treaty with the objective of abolishing or restricting exclusive rights of telecommunications organisations which are based on state measures.^[30]

The European Union has also released a number of Directives over the years to ensure that new technologies are covered by the original 1990 Directive on liberalisation so as to confirm the continuing relevance and importance of the liberalisation process.^[31] The Bangemann Report amongst others^[32] highlights that these activities were also viewed by the European Union in the greater context of creating an environment conducive to fostering the ‘information society’. In a recent review report the European Union state:

Telecommunications are at the heart of the information society which promises extensive opportunities for European businesses and a significant contribution to improved living standards for the European citizen.^[33]

The United States position is slightly different than the European Union or Australian experience as they have had private players in the telecommunications market for many years regulated through State Public Utility Commissions. Under the United States constitution the federal government has power to legislate with regard to interstate communications only, intrastate or local service is the responsibility of state regulation. Prior to the Telecommunications Act 1996^[34] telecommunications at the federal level was regulated under the Communications Act 1934^[35] which spread responsibility for telecommunications across both state and federal regulatory agencies, the Utility Commissions. The aim of the federal government with the Telecommunications Act of 1996 was to open up the local exchange services market to competition although the impetus was not only local and national. The United States realised that they had to open up their telecommunications services to competition in preparation for the implementation of the WTO Agreement on Basic Telecommunications Services.

The central goal of the Telecommunications Act is to encourage competition in the telecommunications market by creating a pro-competitive deregulatory national policy framework that would accelerate the deployment of new telecommunications services and technologies to the American people. The law underscores the belief of Congress that competition is the quickest and the best way to provide these services at reasonable rates.^[36]

As Kirkham states though this competitive model is at odds with the USO that was more manageable under a structured monopoly.

The 1996 Act remaps the regulatory landscape of the US telecommunications sector by striking a vague new balance between the dual goals of encouraging technological innovation through competition on the one hand, and preserving and advancing universal service standards on the other. Rejecting traditional centralised ‘natural monopoly’ models for common carriers in the telephone industry, the 1996 Act seeks to decentralize regional monopoly market power over common carrier service and infrastructure.^[37]

Turning to the Act itself whilst its stated purpose is to ‘promote competition and reduce regulation’ , as Naftel notes:

it would be an exaggeration to call it a de-regulation Act. The Federal Communications Commission is required to engage in eighty-three separate rule-making proceedings under the Act.^[38]

The Telecommunications Act 1996 places the duty on telecom organisations designated as local exchange carriers to negotiate interconnection terms which are then presented to State Utility Commissions for approval. The local exchange carriers must also allow other telecommunications carriers to interconnect to facilitate competition. The Telecommunications Act 1996 also repeals the Federal Communications Commission’s authority to immunise telephone company mergers from anti-trust scrutiny.^[39]

Further if the State Commissions do not approve negotiated interconnection agreements the Federal Communications Commission can decide the terms of the agreement. Whilst this would seem to be a stronger position than under the Communications Act 1934, and it is directly aimed at fostering competition at the local level, Naftel questions the fact that it would seem that the competition is not market driven.

It would seem that this is the heavy hand of regulation by the FCC and the State Commissions. Rather than letting the market decide, the Act spells out exactly how competition will occur.^[40]

Bartlett points out that the strong regulatory control is desirable as it breaks the control of local exchange carriers to monopolise local facilities and impede the further development of free market competition.^[41] The result of this regulatory control though has been a rise in litigation though, which according to Bartlett, has “brought the interconnection process to a stop.”^[42] Further Bartlett believes the Telecommunications Act fails because it:

tried to jump-start competition before ensuring that all incumbent local exchange carriers possessed the assumed state of the art technology baseline.^[43]

Australia up until the late 1980’s had a federal run monopoly for telecommunications services. At that time the Australian government believed like the United States and European Union that for Australian telecommunications to develop in line with world developments it needed reform. In the case of Tytel Pty Ltd v Australian Telecommunications Commission it was found that Telecom had abused its market power by engaging in anti-competitive conduct. The court found that Telecom’s market power derived in part from its freedom to impose its own regulatory controls.^[44] According to Given:

This alerted the government to the possibility that Telecom’s dual position as both a supplier of services and equipment and defacto regulator might not be sustainable.^[45]

The process of reform began with the 1989 Telecommunications Act.^[46] The 1989 Act introduced competition into telecommunications by the provision of value added services and private networks.^[47] Customer equipment provision and cable installations were also opened to competition with an independent regulator AUSTEL (Australian Telecommunications Authority) dealing with approvals and licencing. Telecom still retained monopoly rights on the maintenance of the telecommunications network.

Despite internal problems the Government of the day still pursued further reform and in 1991 introduced a new Telecommunications Act.^[48] The key stance in the new legislation was that the Government would:

initially establish a general carrier duopoly that would allow a new competitor to ‘strive for market share’ on a relatively stable and predictable basis and would minimise infrastructure duplication… However the carrier duopoly would end on June 30^th 1997 after the second carrier had been given a period of time to establish itself in the market place.^[49]

AUSTEL was given powers related to competition regulation and was now responsible for cost setting, carrier service quality and management of the numbering of telecommunications services.^[50] The present Act came into force in 1997^[51] with the same goals as the United States and European Union policies. It was designed to provide cheaper and higher quality telecommunications services through competition. As Given states:

The Act asserts the centrality of service providers and removes or erodes many of the exclusive rights enjoyed by carriers under the 1991 Act. Further, it removes all former restrictions on the issue of carrier licences and dissolves the distinction made in the 1991 Act between general and mobile carriers.^[52]

At the same time the Telecommunications Act 1997 was introduced a new scheme for regulating anti-competitive behaviour was implemented. In an amendment to the Trade Practices Act 1974 ^[53] powers under the Telecommunications Act 1991 that were industry specific were placed in Part XIB of the Trade Practices Act 1974 and a special competition rule created.^[54] Taperell notes though:

Although the treatment of anti-competitive conduct in Pt XIB is said to be based on s46 of the TPA, it is, in fact, quite different. To begin with, Pt XIB does not contain a statutory prohibition on conduct. ^[55]

And further:

Cross-disciplinary, academic analysis of regulatory discretion suggests that the extent of discretion proposed for the commission in Pt XIB will create more problems than it resolves. Discretion leads to arbitrariness unless applied in a general and consistent way.^[56]

Specifically the Act contains a Competition Notice Scheme which has actually proved to be a somewhat toothless tiger as Taperell predicted, ^[57] and is not self-executing.^[58]

These developments were in line with the general changes to competition law that had resulted from the Hilmer Report. The Report identified that there were too many exemptions from trade practices law enjoyed by public monopolies and that these should only be allowed “where real public benefit” resulted.^[59] Also by putting the majority of the anti-competition provisions into the Trade Practices Act 1974 the result was that the telecommunications market also became more accountable under the general market power provisions of Part IV and Part XIC of the Trade Practices Act 1974 by declaring services to be subject to access obligations. A result of the Report was the creation of the Australian Competition and Consumer Council (ACCC) as regulator and ‘enforcer’^[60], to co-ordinate national competition policies and they now regulate competition within the telecommunications regime.

The ACCC makes no excuses that its main aim is to enforce the evolutionary development of the telecommunications reforms since 1989. They state:

These reforms have been directed to introducing commercial disciplines into the provision of an essential service.^[61]

As Leonard points out this is an ‘effects-focussed regime’ that will apply economic principles to the benefit of the ‘long-term interests of the consumer’. ^[62] The ACCC itself sees its biggest issue to date as:

The Commission considers that a key competition issue at stake (with Telecommunications) is ensuring that there is effective regulation of access by new entrants to the encumbent’s network. In the telecommunications industry the incumbent has substantial advantage over new entrants through, inter alia, its control of access to key network elements.^[63]

The ACCC has released an Information paper on Anti-competitive conduct in telecommunications markets^[64] which outlines the position they will take:

Generally for those seeking guidance as to how the Commission will administer the new telecommunications provisions, a starting point needs to be what the Commission has done and said in the past when applying general competition law provisions to other similar industries. Moreover, the ultimate decision making body in relation to the new telecommunications rules will be the Courts.^[65]

USO

As we have seen the European Union, the United States and Australia have introduced competition into the telecommunications market to promote efficiency and foster technological development. They all see that telecommunications is both an increasingly important commercial activity and also the ‘backbone’ of the ‘information society’ developments. There are problems though with the open competition model, not only in terms of ensuring that competition is actively regulated, but also in terms of applying the USO which is a central policy principle in the European Union, United States and Australian legislation and policy documents. On the one hand the USO is seen as a burden when trying to foster competition as it effectively ‘hobbles’ telecommunications providers with debt and service obligations that are hard to meet while also trying to expand competitively. As Kirkham states there are some advantages with the USO principles:

universal service makes economic sense because the value of a communications network increases for all users as more people are added to the network.^[66]

The European Union along with their harmonisation and liberalisation directives and policies have also concentrated on the USO principle to ensure that it receives equal attention in all member states and that a common level of service can be established:

In the past there was no harmonisation at a European level of universal service in the telecommunications sector. Priorities were set at a national level and in the absence of competition forces in most member states this produced mixed results; positive developments such as full network digitalisation in France or the very high levels of service penetration in Scandinavian member states, but also worrying failures in certain countries in terms of poor service, long waiting lists to get a phone or long delays in repairing faults.^[67]

Huisjes also points out that the European Union recognises that telecommunications services have an important role to play in strengthening social and economic cohesion with the European Union.^[68]

Generally the USO in the European Union corresponds to the obligation to provide access to the public telephone network and to deliver an affordable telephone service to all users reasonably requesting it.^[69] The ONP Voice Telephony Directive explicitly states this and extended it to include directory assistance, operator assistance and emergency services provision.^[70] The recent WTO Agreement on Basic Telecommunications Services also ensures that the USO will be on everyone’s agenda as it is one of the common principles set down in the agreement.

Members have the right to provide universal service obligations, which must be administered in a transparent, non-discriminatory and competitively neutral manner.^[71]

Turning to the USO principles in the United States it can be seen that this principle has been on the United States agenda since the Communications Act 1934. In Title 1 the Act states one of its goals is

to make available, so far as possible, to all people of the United States rapid, efficient, nation-wide and world-wide wire and radio communications services with adequate facilities at reasonable charges.^[72]

Hammond states that “ in telephony, this policy evolved into the requirement that monopoly telephone companies provide service to as many Americans as possible.”^[73] By 1994 though there still was not universal coverage.^[74] The Telecommunications Act 1996 takes the USO principles further and entrusts the development of the USO to the Federal Communications Commission and a new Joint Federal State Board on Universal Service.^[75]

The 1996 Act also recognises that the USO principle is an evolving one and will need to be updated to reflect technological developments. Section 254 (c)(1) describes:

universal service as an evolving level of telecommunications services that the Commission shall establish periodically under this section, taking into account advances in telecommunications and information technologies and services.^[76]

Further the Federal Communications Commission states

Moreover, the 1996 Act’s legislative history provides that the Commission is given specific authority to alter the definition from time to time in order to take into account advances in telecommunications and information technology.^[77]

To date the Joint Federal State Board has stated that the USO definition should include:

voice graded access to the public switched network, with the ability to place and receive calls; touch-tone or dual-tone multi-frequency signalling or its functional equivalent; single party service; access to emergency services; access to operator services; access to interchange services and access to directory assistance.^[78]

One of the most important aspects of the USO under the Telecommunications Act 1996 is the fact that is has within the legislation already been extended to include Internet access by schools and rural health care workers.^[79] This will be discussed further.

It seems in Australia, considering our ‘tyranny of distance’ that we are slow to formalise the USO beyond what the United States terms POTS.^[80] The definition of USO in the Telecommunications Act 1997 is essentially the same as the one in the Telecommunications Act 1991^[81] and differs from the European Union and United States approach which has been to define the USO in broad policy terms rather than directly related to one type of communication service.^[82] The Telecommunications Act 1997 in section 149 states:

(1) For the purposes of this Act, the universal service obligation is the obligation.
(a) to ensure that standard telephone services are reasonably accessible to all people in Australia on.
on an equitable basis.^[83]

The same section of the Act goes on to identify payphones and carriage services as part of the USO.^[84] The legislation further sets out the requirements as to who may be termed ‘national’ or ‘regional’ universal service providers^[85] and the specifics related to a ‘universal services plan’ that must be provided by the universal services provider.^[86] Like the United States legislation, although only at the federal level, the Telecommunications Act 1997 places an obligation on the universal services provider to fund a levy to guarantee the USO.^[87] Given does point out that the Act allows the Minister to both extend the USO to more than one provider and to consider the possible upgrading of the USO by prescribing new purposes for the standard telephone service.^[88] Given further states that the USO was one of the major reasons that the government favoured monopolies for so long because the internal cross subsidies ensured the provision of basic telecommunications services to the whole population. “Profitable customers could cross-subsidise unprofitable customers.”^[89]

Extension of the USO to new technologies

As we have seen the new legislative developments in the European Union, United States and Australia have encouraged competition in the telecommunications market place for increased efficiency and for economic reasons. They have also attempted to ensure that the USO are fully met in this open competition environment. They generally have not though taken into account the rapidly changing technological environment and the growth of the ‘information economy’ although the European Union seem to realise the importance of doing so:

Universal service is a dynamic and evolving concept. It is one of the essential elements of this information society and the priority attached to it must be considered in the context of the Community’s policy of fully opening telecommunications markets to competition.^[90]

As stated earlier the convergence of technologies was one of the impetuses for the liberalisation of telecommunications and the results have spawned new developments:

Since the liberalisation process began, there have been continuous improvements in levels and quality of services, with corresponding fall in prices…Liberalisation is also the driver of , and driven by, an unprecedented take-up of new services and technologies. Europe has already seen enormous growth in three areas: mobile communications, with more than 45 million users through out the Union today; the use of fax, which has grown dramatically during the nineties; and now the internet, potentially the single most important development in telecommunications for decades and stimulated in particular by the rapidly increasing penetration rate of personal computers in the European union market. ^[91]

The phenomenon of convergence is now putting new pressure on governments to consider how they must expand their USO principles to incorporate the social effects of convergence together with telecommunications as the ‘backbone’ of the information society developments. The European Union has released a Green paper on convergence of the telecommunications, media and information technology sectors.^[92] They see this new convergence phenomenon as two-fold. First it encompasses “the ability of different network platforms to carry essentially similar kinds of services” and “the coming together of consumer devices such as the telephone, television and personal computer.”^[93] The Report identifies these new areas as home banking and home shopping over the internet, email, data and voice over the internet and developments such as web-TV.^[94]

The question governments now face is to what level should the USO be defined given the fact that technology is changing and converging and the ability to develop^[95] in the information society is increasingly being tied to a person’s ability to access telecommunications services. ^[96] Xavier points out that new types of technological convergence are also forcing a redefinition of USO:

Technological convergence is also leading to regulatory convergence. In short, policy that focuses on content, sometimes called ‘information policy’, and policy that focuses on delivery, sometimes called ‘telecommunications policy’ will become increasingly intertwined and this is likely to effect calls for a redefinition of universal service.^[97]

Further as Mueller states:

A conception of universal service that centers on the wire into the home, however, is no longer meaningful… The infrastructure of telecommunications are proliferating in number and expanding at an unprecedented rate…The most important universal service issue now and for the foreseeable future concerns how people will access and use the infrastructure that surrounds them.^[98]

This issue has been noted in the European Union in the First Monitoring Report on Universal Service.^[99] In that report they discuss the effect of the internet on society and whether the internet (in terms of it’s role as a carriage service as distinct from the internet as a content service) should be included in the USO concept.^[100] They also warn of the harm in not legislating to expand the USO definition to include technological developments such as the internet:

With regard to its possible evolution, particularly in the context of the information society, a well defined concept of universal service protects against the risk that market forces on their own might exclude certain groups of users or users in certain regions from being able to access new services.^[101]

The Legal Advisory Board in the UK has crystallised the issue by stating that universal service should not be viewed in terms of current technologies, but rather as a ‘market issue’ or ‘public services/access issue’, where USO is considered as a right for citizens to “participate in the benefits of the emerging information society.”^[102] Back in 1995 the European Union at that point, identified that ‘public access’ to the information society developments should be viewed as a right, with USO the legislative framework within which to ensure this happened.^[103]

In Australia, as stated, the Minister under the Telecommunications Act 1997 has the ability to review the USO as needed. Before the introduction of the 1997 Act though a government report in 1996 decided at that point to reject the inclusion of fax, ISDN and access to the internet as part of the USO. This was generally because “For one thing, they failed to meet the ‘level of market penetration test’ at present”^[104], although they did qualify that if the market penetration continues to grow this assessment might need to be reviewed.^[105] Another recent report on digital data^[106] and whether it needed to be included in the USO also came up with the same conclusions that market penetration at this point did not warrant inclusion of ISDN and internet access into the USO, although the ‘penetration’ levels are increasingly dramatically. As a recent Australian Bureau of Statistics report noted:

Overall, three million Australians aged 18 and over had accessed the internet in the 12 months to February 1998 from work, home or another location.^[107]

The Digital Data Review though dismisses the relevance of the finding by saying that comprehensive statistics are as yet not being kept.^[108]

Regardless of ‘levels of penetration’, which is obviously tied to economic considerations there is much evidence that the social aspects of the USO are becoming more relevant to the issue of ‘public access’ to the information society developments in Australia as in other countries. The same Digital Data Review recognised this in one of its conclusions:

In the supply of other lower levels of data rate capacity over the PSTN, equity, fairness and citizens’ rights-type reasons may justify some intervention.^[109]

and further:

it would seem that many citizens, particularly those residing in rural areas, see telecommunications services as government provided services, just like libraries, social security and roads and not as a service provided in the open market like insurance, financial advice and fertiliser. They therefore expect the service to be accessible to all, and provided at the same price to all, irrespective of the costs.^[110]

The Digital Data Review report also debates whether issues such as education, access for health care workers in remote areas (ie fundamental rights of citizens for access to good education and health services) are major enough to justify including ISDN access in the USO so that costs become more affordable.^[111] It is interesting to note the 1996 government report on Standard Telephone Services in which it was said:

The desirability of universal access to the telephone was declared as a policy objective long before a substantial majority of the population had been given the opportunity to subscribe to the service.^[112]

This is probably the view that should be taken with the internet and other major technological developments rather than dismissing USO upgrading purely on economic terms without reference to the information society phenomenon. In a 1995 report a recommendation was made that highlighted a possible way through the maze such as is being followed in the European Union:

consideration should be given to amending the legislative concept of a ‘standard telephone service’ to a ‘standard telecommunications service’.^[113]

Further the Explanatory Memorandum to the Telecommunications Bill 1996 qualifies that the USO is a ‘needs based’ service and shouldn’t be viewed just in economic terms.

This principle is the basis for the USO…In relation to the concepts of ‘reasonable access’ and ‘equitable basis’ , it should be noted that these concepts are intended to relate primarily to access in geographical terms and equity in terms of equality of opportunity, rather than concepts of affordability.^[114]

It is interesting to compare recent developments in the United States as they also seem to be offering some possible solutions to this problem. In the first instance, as mentioned, their Telecommunications Act 1996 goes further with their USO definition as it incorporates internet and other technological access for schools and health care workers.^[115] It also takes the European Union stance that the USO is an evolving concept further by incorporating ‘basic’ and ‘advanced’ services in their legislation and stating that it needs continual revision.^[116] A recent report from the Federal State Joint Board on Universal Service has reinforced the United States position on including new technologies within the USO.

In this report, we find, under the framework of the 1996 Act, that universal service and the growth of new Internet-based information services are mutually reinforcing. The development and continued growth of information services depends upon the preservation and advancement of universal service. By connecting our nation’s telecommunications networks to all citizens, we expand the potential customer basis for information services. At the same time, the growth of Internet- based information services greatly stimulates our country’s use of telecommunications, and thereby, the revenue base from which we now fund universal service.^[117]

The Report also firmly advocates that internet activity, most notably IP Telephony, should be viewed as ‘telecommunications services’ rather than ‘information services’ and be included in the USO.^[118] This current debate is what Hammond refers to as a ‘critical point in time’ where:

The confluence of communications convergence and concentration, and the rapid expansion of governmental and business reliance on network efficiencies, are occurring at a time of uneven and often inequitable deployment of technology and information, rising costs of access to technology and information, and growing disparities in personal and geographic income.^[119]

He believes the United States government should be even more liberal with the USO so as to ensure that there is equal access to the gains of the development of the information society.^[120] This has been recognised by many in the United States as noted by the congress debate on the Telecommunications Bill of 1996:

if major telecommunications networks such as internet access are denied in the rural areas, state-of-the-art technology will be deployed only in the mass markets with dense population where the providers are able to obtain cost-benefit ratios which are attractive to the provider.^[121]

In conclusion it would seem that currently Australia, the United States and the European Union, as well as other jurisdictions are facing a series of hurdles related to the integration of technological advances and convergence of technologies with their legislative attempts to open telecommunications to full competition and also preserve and advance the USO which forms part of their social policy obligations. Often, as evidenced in the Australian Digital Data Review report, government hopes that market competition will provide the seeding ground for full development of new technologies without having to declare them as part of the USO to ensure equitable access by their citizens.^[122] The problem with this stance may lie in the increasingly inter-related issue of the USO as being the obligation as well for governments to ensure equal and equitable access to the developments currently labelled as the information society phenomenon. Telecommunications services, in terms of the USO, are increasingly being seen as independent of technical and narrow definitions based on a particular service such as the ‘standard telephone service’. Rather it is being advocated that it should be recognised that they be open to inclusion of various different types of technology. As technology advances, the internet amongst other developments, is being seen more and more as a ‘carriage service’ ie a delivery platform like telephone lines delivering voice and fax, rather than purely as a ‘content service’. Its importance as part of the USO is undeniable when we also consider the growing importance it is having as the delivery platform in areas such as e-commerce, health care and education and the consequences for those who can access technology against those who cannot access technology on the same level.^[123]

[*] Bond University

^[1] ‘Liberalisation” involves the removal of statutory monopoly rights, and the removal of special and exclusive rights, to allow in third parties and create a competitive sector. Weir D The International Experience. 1-21. In Telecommunications Post 1997. Melbourne BLEC 1995 at page 9

^[2] A good general explanation of Universal Service is

“a public policy to spread telecommunications to as many members of society as possible, and to make available, directly or indirectly, the funds necessary to support the policy.”

Noam, E Will Universal Service and Common carrier Survive the Telecommunications Act of 1996? (1997) 97 Columbia Law Review 955-975 at page 957

^[3] Convergence is the combination of both new and existing media eg broadcasting, cable, fiber optics, satellite into one integrated system for the delivery of video, voice and data. Botein, M Cable/Telco Mergers and Acquisitions: Antitrust vs Telecommunications Act Approaches. In Practising Law Institute. New York, PLI 1996 at page 481

Another definition introduces the PC

“At the transport level, convergence means data networks also carrying voice, video and images. At the user interface level, it means PC’s becoming telephones and mobile phones becoming devices that can browse the web and send email. At the infrastructure level, it means PBX’s and other phone switches being replaced or augmented by servers. Thyfault, M Resurgence of convergence. Information Week April 13^th 1998 at page 1 of 2 (available on Lexis: ABI/Inform)

^[4] Crago defines the internet as “ a global amalgamation of computer networks connected by a common communications protocol.” Crago, P Fundamental Rights on the Infobahn: Regulating the Delivery of Internet Related Services within the European Union (1997) 20 Hastings International and Comparative Law Review pages 467-503 at 474

^[5] Scott, C The Proceduralization of Telecommunications Law: Adapting to Convergence. (1997) 3 The Journal of Information Law and Technology 1-16 at 2 (available at http://elj.warwick.ac.uk/jilt/wip/97_3scot

^[6] Flynn, L European Union Regulation of the Telecommunications Industry. (1996) 10(1) International Review of Law Computers and Technology 9-26 at 9

In Europe the telecom services markets of member states of the European Union are worth ECU 141,000 million and growing at 8.2% annually. Third Report on the Implementation of the EU Telecommunications Regulatory Package.( IP/98/165) Brussels, European Union 1998 at page 1

In Australia the telecom services industry is estimated to have grown by 7.3% in 1994-1995 alone. Xavier, P Monitoring telecommunications deregulation through international benchmarking. (1996) 20(8) Telecommunications Policy 585-606 at 586

The Telstra (Transition to Full Private Ownership) Bill 1998 (preamble page 2) also states in no uncertain terms the economic reasons behind privatisation

“ In today’s highly competitive, global communications environment, it does not make commercial sense, nor is it good public policy, for telecommunications companies to be owned by government.”

^[7] Hurley, A Convergence in Communication and the Law. In Wedemeyer, D (ed) Pacific Telecommunications Council Seventeenth Annual Conference. Proceedings. Hawaii, Pacific Telecommunications Council 1995 pages 366-369 at 367

^[8] Loc cit Flynn at page 10

Hammond believes a better metaphor should be ‘national nervous system’ as telecommunications is now necessary for basic functions within society. Hammond, A Universal Service in the Digital Age (1997) 50 Federal Communications Law Journal 179-214 at 184

^[9] Whilst as stated the telecommunications sector itself represents ECU 141,000 million according to Ungerer the information sector overall represents ECU 450 billion. Some estimates, he states, forecast that worldwide this will grow to US $ 3 trillion by the end of the decade.

Ungerer, H EC Competition Law in the Telecommunications, Media and Information Technology Sectors (1996) 19 Fordham International Law Journal 1111-1176 at 1112

A recent Australian article states this is now $1.8 trillion already. Butler, G Telecommunications Fuels $1.8tr Juggernaut Australian Financial Review August 7^th 1998 at page 53

The European Commission declared it’s progress in this regard. “ The Community telecommunications regulatory framework, which has as its objective the creation of a liberalised and harmonised European market on the basis of Articles 90 and 100a of the European Treaty, is now nearing completion.”. European Commission. Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on the Implementation of the Telecommunications Regulatory Package. (PBR/ALC/HLH/pbr D(97) draft\ratrep3) 22^nd May 1997 at page 1

This development has been further enhanced by the World Trade Organisation’s Agreement on Basic Telecommunication Services that took effect on the 5^th February 1998. In that agreement to which Australia has signed international carriers can compete in national markets.

^[10] Independent Committee of Inquiry National Competition Policy (the Hilmer Report). Canberra, AGPS 1993

^[11] European Commission Commission Directive of June 28 1990 on Competition in the Markets for Telecommunications Services (90/388/EEC) Brussels, European Commission 1990 Preamble page 1

^[12] Asher, A Network Industry Regulation and Convergence in Service Delivery: Challenges for Suppliers, Users and Regulators. Staff working paper. Canberra, ACCC 1998

As Hardy states “ One of the greatest challenges for competition policy in Australia in the next decade will be coping with the issue of converging communications technologies.”

Hardy C et al Competition Policy and Communications Convergence [1994] UNSWLawJl 6; (1994) 17(1) University of NSW Law Journal 156-186 at 157

^[13] Loc cit Hammond at page 182

^[14] European Commission. Universal Service for Telecommunications in the Perspective of a Fully Liberalised Environment. COM(96)73. Brussels, European Commission 1996 at page 2

^[15] European Commission. Directive of the European Parliament on Interconnection in Telecommunications with Regard to Ensuring Universal Service and Interoperability through Application of the Principles of Open Network Provision. 34/96. Brussels, European Commission 1996

^[16] Lewis, S Bush Sweet-talked on Telstra. Australian Financial Review July 9^th 1998 at page 3

^[17] Telecom Australia. Government Telecommunications Policy Review. Statement of Telecom Australia Position. Melbourne, Telecom 1987 at page 5

^[18] Boswell, R The Implications of National Competition Policy (1996) 55(2) Australian Journal of Public Administration 79-82 at 79

^[19] Loc cit Weir at page 6

^[20] Loc cit Ungerer at page 1117

^[21] Lin, A Telecommunications Competition in the European Union after France v Commission—The Terminal Equipment Case. (1994) 9 Connecticut Journal of International Law 355-397 at page 369

^[22] Huntley, J Laboratories of De-Regulation? Implications for Europe of American State Telecommunications Policy. (1997) 1 The Journal of Law and Information Technology 1-26 at page 14

^[23] European Commission. Towards a Dynamic European Economy: Green Paper on the Development of the Common Market for Telecommunications Services and Equipment. COM (87) 290 Final.

^[24] Huisjes, S Liberalizing the European Telecommunications Market: A Stepping Stone with Stumbling Blocks. (1997) 4 The EDI Law Review 73-79 at page 75

^[25] European Commission. Council Directive of 28 June 1990 on the Establishment of the Internal Market for Telecommunications Services through the Implementation of Open Network Provision. (90/387/EEC)

^[26] Ibid at Preamble page 2

^[27] Loc cit Commission Directive on Competition in the Markets for Telecommunication Services

In 1994 they set the date for liberalisation as 1/1/98

European Commission. Council Resolution of 22 December 1994 on the Principles and Timetable for the Liberalisation of Telecommunications Infrastructures OJ 1994 C379/4

By early 1998 they had quite a high success level of implementation. According to a recent report there are 35 infringement proceedings under way to rectify national measures that still do not comply with the Directives.

Loc cit Third Report on the Implementation of the Telecommunications Regulatory Package at page 3

^[28] European Commission. Guidelines on the application of EEC Competition Rules in the Telecommunications Sector 92/C233/02 OJ C233/26/9/91

^[29] Loc cit Flynn at page 15

^[30] France v Commission 1991 ECR 1-1223 at page 1224

^[31] European Commission. Commission Directive amending Directive 88/301/EEC and Directive 90/388/EEC in particular with regard to satellite communication 94/46/EEC OJ 1994 L268/15

European Commission. Commission Directive amending Directive 90/388/EEC with regard to the abolition of the restrictions on the use of cable television networks for the provision of already liberalised telecommunication services. 95/51/EC OJ 1995 L256/49

European Commission. Commission Directive amending Directive 90/388/EEC with regard to mobile and personal communications 96/2/EC OJ 1996 L20/59

^[32] Bangemann Report. Europe and the Global Information Society. Recommendations to the European Council . Brussels, European Union 1994. The Report pleads for a break with the past, ending monopolies and making rapid progress towards a fully liberalised environment.