A (telco) licence to operate - consultation now open on a potential CSP registration or licensing scheme

The Government is consulting on whether it should develop a registration or licensing scheme for carriage service providers (CSPs) and if so, what the scheme would look like. This represents a significant change from the regulatory approach taken to date in Australia, and indeed in many international jurisdictions. In this article, we’ll explore why the Government is considering a potential registration scheme, what the scheme may look like and the impact on telco sector participants.

Tell me in 30 seconds

• The Government is consulting on whether it may be appropriate to introduce a registration or licensing scheme for CSPs. Currently, only carriers are required to have a carrier licence or nominated carrier declaration.
• Such a scheme may increase visibility of CSPs operating in the telco market and provide the Australian Communications and Media Authority (ACMA) with an effective mechanism for removing a CSP from the market where there has been repeated or egregious failures to meet relevant regulatory obligations.
• The Government acknowledges that a registration or licensing scheme would impose additional costs on industry, could create potential barriers to entry into the telco market and may have an impact on competition.
• No decision has yet been made about a registration or licensing scheme. Industry views will therefore be crucial in informing and shaping the Government’s approach to the development of any such scheme.
• The consultation ends on 30 November 2023.

Introduction

The Department of Infrastructure, Transport, Regional Development, Communication, and the Arts (the Department) recently released a discussion paper inviting input from industry on the potential development of a registration or licensing scheme for CSPs in Australia.

The Telecommunications Act 1997 defines a CSP as any person that supplies, or proposes to supply, a listed carriage service to the public using a network unit owned by one or more carriers, or covered by a nominated carrier declaration. A listed carriage service is a carriage service between a point and one or more points, where at least one point is in Australia.

The paper is primarily focussed on a possible model involving the registration of CSPs, requiring minimal pre-registration information provision and assessment. The Department notes that another option would be the ‘licensing’ of CSPs, which would involve a more detailed pre-entry process and could potentially include an assessment of the applicant’s organisational and technical capacity and financial resources. The proposed process would be similar to the ‘authorisation’ process that currently applies in the energy sector.

However, the Department recognises that a licensing option would impose a significantly higher burden on industry, potentially create a barrier to entry into the telco market and would involve an increase in the time and cost required to implement and administer the scheme compared to a registration model.

Why is the Government considering a proposed registration scheme?

While CSPs must adhere to various laws and regulations, they are not currently subject to any formal registration or licensing requirements (unlike carriers, who must be licensed or have a nominated carrier declaration). This approach is intended to ensure that there is a low barrier to entry for telco service providers, and has fostered a diverse and competitive market for the supply of telco services in Australia.

However, regulators and consumer groups have argued that the lack of a registration or licensing scheme has also allowed some CSPs to operate in ways that cause significant consumer harm without effective mechanisms for redress.

The discussion paper sets out two key reasons for introducing a registration or licensing scheme:

1. To build a comprehensive list of CSPs, in order to support the ACMA’s work to proactively educate CSPs about their obligations and target compliance and enforcement activity; and
2. To facilitate an effective mechanism the ACMA can use to stop CSPs who pose an unacceptable risk to consumers, or cause significant consumer harm, from operating in the market.

While the idea of a CSP registration scheme represents a significant pivot from the current regulatory approach, it isn’t a new concept and can be traced back to the ACMA’s submission to the Consumer Safeguards Review in 2020, in which it advocated for a new registration system to enhance visibility over the CSP market.

What could a potential registration scheme look like?

The discussion paper proposes a ‘light touch’ registration scheme that adopts a risk-based approach, introducing regulatory measures tailored to address high-risk CSPs while minimising additional regulatory burdens on those deemed low-risk. This approach is aimed at promoting competition and efficiency in the telco sector by keeping barriers to entry low.

Design considerations proposed by the Department include:

Potential approaches to excluding CSPs from the market

A significant concern for both the Government and sector regulators is that there is currently no mechanism for quickly and effectively stopping a CSP’s operations, or preventing its re-entry into the market, where it has engaged in repeated or egregious breaches of consumer safeguards.

Although there are existing legal mechanisms to ban CSPs or their directors under the Australian Consumer Law and the Corporations Act 2001, the Department notes that they are not tailored to the telco industry and often involve lengthy court processes.

The Australian Competition and Consumer Commission and the ACMA have argued that the ability to deregister non-compliant CSPs would act as a strong deterrent and encourage industry improvement, fostering consumer confidence and safeguard compliance.

The key issues explored in the discussion paper relating to an ability to deregister CSPs include:

Next steps

Submissions on the discussion paper can be made to the Department until 11:59pm AEDT on 30 November 2023.

The Government has not yet made any decisions about a registration or licensing scheme. The discussion paper is intended to be exploratory in nature, and the feedback received will inform considerations and guide the Department’s advice to the Government. Industry views will therefore play an important role in shaping the Government’s approach. The Department has also flagged that stakeholders will have additional opportunities to engage if a registration or licensing scheme is considered further (including, for example, on any draft legislation or instruments).

If you would like to discuss any of the issues raised in the discussion paper, or need assistance with preparing a submission, please get in touch with any of our telco experts.