Key Points: The market failure that the National Access Regime should address is a lack of effective competition in markets for infrastructure services due to natural monopoly.

• This is likely to constitute an economic problem where service providers deny access to, or restrict output and charge monopoly prices for, their facilities and access is required for third parties to compete effectively in dependent markets.

• Regulated access to infrastructure services can promote competition and investment in dependent markets and generate benefits to the community. These benefits must be weighed against the costs of the Regime, including any negative effects on investment in infrastructure due to the threat of regulated access.
• Reforms are necessary to better target the Regime to the economic problem so that the use of access regulation is confined to where it is most likely to generate net benefits to the community.
  • Proposed amendments to the declaration criteria seek to achieve this outcome.
• The Regime grants third parties a right to negotiate access with the service provider after the designated Minister 'declares' a particular infrastructure service. Although declaration has been rare, this does not mean the Regime has been unsuccessful. Only in exceptional cases should access to an infrastructure service be regulated.
• The negotiate–arbitrate framework is appropriate for a generic access regime. Primacy should continue to be given to negotiation between service providers and access seekers, underpinned by a credible threat of regulated access in certain cases.
• Amendments to the Competition and Consumer Act 2010 (Cwlth) and the High Court judgment on the Pilbara rail case mean that merits reviews by the Australian Competition Tribunal will likely be more confined and not take as long as in the past. On balance, it is anticipated that these changes will provide an appropriate form of limited merits review that should contribute to sound decisions.
• Regulatory and investment certainty would be improved if there was greater transparency as to how the Australian Competition and Consumer Commission would exercise its power to direct extensions to infrastructure facilities.
• A number of governments have indicated that further privatisation of infrastructure facilities will occur. It is important that appropriate access arrangements are in place before government infrastructure is privatised, as this will reduce regulatory and investment uncertainty for service providers, access seekers and investors.
• Industry-specific access regimes appear to have worked well. However, before any additional industry-specific regimes are introduced, it would need to be clearly demonstrated that there is a policy problem that is best addressed by access regulation, and that regulation would be best implemented at the industry level.
• The certification process should be reformed to improve regulatory certainty.
• There does not appear to be a need for additional mandatory undertakings at this time. Where mandatory undertakings are used, they should be subject to upfront and ongoing assessment to ensure that the benefits outweigh the costs.
• The Commission is seeking further information on the effectiveness of the Competition and Infrastructure Reform Agreement.

Submissions due Friday 5 July 2013