Friday, 12 August 2016

Time to kill off an absurdity

Today the Commerce Commission said that it is starting a study of domestic telecom backhaul services (the connections that carry your internet traffic around New Zealand). They're doing it to
  • understand how the market for domestic backhaul services has evolved in today’s telecommunications environment and what it may look like in the foreseeable future
  • consider what, if any, changes may be required or are desirable to the regulatory framework to best promote competition for the long-term benefit of end-users
and among other things the Commission will be looking at "emerging competition issues (if any) that may require a regulatory response".

Excellent. It makes total sense for the Commission to be on top of what's happening in these important and fast-moving sectors, to be thinking about whether existing regulation is still needed or fit for purpose, and if there's a case for new or different regulation.

Irrespective of the regulation angle, it's also worthwhile that the Commission will be looking out for any competition problems. That's what you'd expect a competition authority to do. You'd be annoyed if it didn't. And it makes total sense that the Commission "must monitor competition" in telecoms (s9A(1)a of the Telecommunications Act), may fossick around in anything telco-related (s9A(1)b), and must publish its results (s9A(1)c).

But that's where the policy coherence ends. The Commission must monitor competition in telecoms. But it must not monitor competition anywhere else, because of a debatable decision of the Court of Appeal* in 1994 which hasn't been fixed since. The Commission back then had gone and looked at whether the telco regulation of its day (an information disclosure regime) was any good (it wasn't). Telecom challenged its right to have looked. And the presiding judge said
The basic difficulty with the argument put forward for the that it would endow the Commission with the role of an ongoing and omniscient watchdog, policing the operation of the Commerce Act in all respects and reaching out to other statutory fields such as that of the disclosure regulations. It is not unnatural that something of that sort might be expected by someone not closely familiar with the Commerce Act, but it is not a view which survives scrutiny of the Act
If every man and his dog in their "not unnatural" naïveté would have expected the Commission to be able to look at competition around New Zealand - this under an Act, recall, which has as its purpose "to promote competition in markets" - but the Act, in the learned opinion of their Lordships of Appeal, doesn't actually allow the Commission to look at the state of competition, then the Act should have been smartly amended.

But of course it hasn't been, and here we are twenty years on, still footling about. MBIE, to be fair, has consulted on giving the Commission a "market studies" power: I hope we're finally getting closer to rationalising the absurdity of requiring competition to be monitored in one sector and forbidding it everywhere else.

*Sometimes called the 'Telecom "fishing" case', or more formally Commerce Commission v Telecom Corporation of New Zealand Ltd [1994], 2 NZLR 421 (CA)

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