Analyses the effectiveness of Australia's National Access Regime, which aims to ensure all firms can access essential infrastructure, and examines potential reform options.
The National Access Regime is a regulatory framework that provides an avenue for firms to access certain ‘essential’ infrastructure services owned and operated by others, when commercial negotiations on access are unsuccessful.
- The National Access Regime should be retained.
- Access regulation can address an enduring lack of effective competition, due to natural monopoly, in markets for infrastructure services where access is required for third parties to compete effectively in dependent markets. This is the only economic problem access regulation should address.
- The scope of the Regime should be confined to ensure its use is limited to the exceptional cases where the benefits arising from increased competition in dependent markets are likely to outweigh the costs of regulated third party access to infrastructure services. Proposed changes to the declaration criteria seek to achieve this outcome.
- Robust institutional arrangements, including an avenue to limited merits review, should ensure that access regulation is judiciously applied.
- When considering whether to regulate access to infrastructure services in the future, governments should seek to demonstrate that there is a lack of effective competition in the market for the service that is best addressed by access regulation. An assessment of the net benefits should determine whether access regulation is most appropriately applied at the facility or industry level.
- Facility based arrangements impose net costs if they are incorrectly applied, and provide incentives for lobbying. Such arrangements should be limited to where there is a clear net benefit from tailoring access regimes for a specific facility.
- Further industry specific regimes should apply only where there is sufficient similarity between infrastructure services within the industry and where the industry has features that justify different regulatory treatment from that offered by the generic National Access Regime.
- Caution should be exercised before mandatory undertakings are implemented in the future. Where mandatory undertakings are used, they should be subject to upfront and ongoing assessment to ensure they are used to target the economic problem. Safeguards for the provider and other existing users of the service should be consistent with those for declared services.
- There is an economic rationale for the Australian Competition and Consumer Commission's (ACCC's) power to direct infrastructure extensions in an access determination but, due to the practical difficulties of directing extensions, it is likely that the benefits of using the power would rarely outweigh the costs.
- Part IIIA should be amended to confirm that the ACCC's legislative power to direct extensions also encompasses capacity expansions. This will ensure that the safeguards set out in the legislation will also apply to directed expansions.
- Following a public consultation process, the ACCC should develop guidelines outlining how it would exercise its legislative power to direct extensions such that it would be expected to generate net benefits to the community. The preparation of the guidelines should include an analysis of the workability and adequacy of the provision to direct extensions and its safeguards.
- The safeguards should not be construed such that a service provider could be required to pay the upfront costs of the directed extension or capacity expansion.