Proceeding through the parliament is an amendment to the national access regime, which falls under the Trade Practices Act. This gives expression to recommendations made by the Productivity Commission and other reports dating back to 2001.
The national access regime was put in place following the Hilmer review of competition policy in 1992. At that time, most of Australia's infrastructure -- ports, airports, pipelines road, rail and telecommunications -- was government-owned or had been built as a government-guaranteed monopoly. Much of the infrastructure was best described as having "essential facility" characteristics -- a supplier or customer could not circumvent it. Manufacturing facilities were exempted from oversight.
With the Hilmer report, the government was looking at ways to inject greater competition into the supply of products and services using that infrastructure. To do so required a separation of the "essential facility" from upstream and downstream businesses. This would prevent its users being hostage to vertically integrated monopolies that might favour their own affiliates.
To police the new regime, the government created a new agency, the National Competition Council, and augmented the powers of the Australian Competition and Consumer Commission.
The NCC and the ACCC were given roles in determining whether regulatory control should be retained over facilities, and the ACCC had the additional role of determining prices where access was made mandatory. As might be expected of organisations with a vested interest in policing such controls, both have tended to contrive reasons why regulatory controls should stay in place. They have argued for very strict tests of when regulations might be removed, tests which if applied generally would leave most of the economy under their regulatory purview.
In gas pipelines, the regulatory agencies have argued against removing their price-fixing and access powers even when new pipelines have been built and introduced the discipline of competition over existing facilities. In fact, they have tried to corral the new pipelines within the regulatory ambit, arguing that the competition they bring is inadequate.
With regard to airports, the commonwealth decided that regulations were not required since the services that airports provided were overwhelmingly subject to competition. Nonetheless, the ACCC has wasted no opportunity to argue for the restoration of its coverage.
In telecommunications, Telstra has been subjected to a regulatory corset on access to its copper wire.
In rail access, the NCC tried to force Rio Tinto to open up its West Australian rail lines to a competitor and, in a re-run, is seeking to do the same with regard to BHP Billiton. In both those cases, knowing the regulation will be costly and disruptive, the firms argued that the rail system was part of their manufacturing process, in an attempt to prevent regulatory intrusion.
Much of the debate on the recent amendments was associated with the principles that should be included in the price fixing of those facilities deemed to be monopolies. However, much more important is the means of removing facilities from regulatory price-setting. A regulatory agency, irrespective of the riding instructions it is given on pricing, will never be able to replicate the full subtleties of the market price.
In this respect, the Productivity Commission's analyses clearly concluded that regulation should be removed once rivalry is in place, as is now the case for example with the gas pipelines linking Adelaide and Sydney. Unfortunately, in addressing the national access regime, the commission confined itself to lofty recommendations that require the regulatory authorities to promote "efficiency".
This, to economists within the Productivity Commission, means the regulators should exit controls where alternative suppliers mean that there is no longer a monopoly "essential facility".
However it is doubtful that those applying the regulations will adopt such a definition, and continued imperialism on the part of the regulatory agencies is likely. The ACCC in particular will spend considerable taxpayer funds in order to lobby for the enlargement and protection of its responsibilities.
Regrettably, an opportunity has therefore been missed to clarify and narrow the conditions under which regulatory intervention may take place. The outcome is scant reward for the half-dozen official reports on the matter.
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