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Allens Arthur Robinson

Focus: Telecommunications – May 2003

Telecommunications, technology and free trade agreements

In brief: The acceleration of cross-border trade has led Australia to engage in more formal trade alliances with its key trading partners. Senior Associate Ken Shiu examines the telecommunications and technology aspects of some of these alliances. 

Australian New Zealand CER

Australia's first bilateral free trade agreement (FTA) was the Closer Economic Relations Trade Agreement (CER), signed with New Zealand in 1983. The CER was later supplemented by the 1988 CER Services Protocol, which allowed Australian and New Zealand service providers free access to provide services into each other's markets, including telecommunications services. Currently, only air, shipping and postal services are retained on the list of reserved industries.

In August 2000, Australia and New Zealand signed the Memorandum of Understanding on the Co-ordination of Business Law. Under its general business law harmonisation objectives, both countries are committed to ensure greater consistency in the areas of regulatory governance of electronic commerce and intellectual property rights.

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Singapore Australia Free Trade Agreement

The Singapore Australia Free Trade Agreement (SAFTA), formalised on 17 February 2003, introduces telecommunications regulatory review and co-operative e-commerce policies into Australia's most recently signed bilateral trade policy agreement. It will come into force later this year.

The main telecommunications objectives of the SAFTA require:

  • All interconnect prices to be cost-oriented, non-discriminatory and sufficiently unbundled from any unnecessary network components or facilities.
  • Telco suppliers' interconnection agreements or interconnection offers to be made publicly available.
  • Each country's telecommunications regulator to act in a transparent manner and explain all determinations.
  • Each country's telecommunications regulator to adopt or maintain adequate sanctions to enforce its determinations.
  • The domestic telecommunications regulator to arbitrate on any interconnection dispute between an Australian and Singaporean carrier within 180 days of referral. If the regulator is unable to resolve the dispute within the 180 days, interim determinations are mandated.
  • Each country is to maintain measures to prevent anti-competitive conduct by domestic telcos, including anti-competitive cross-subsidisation, withholding access or technical data, or predatory pricing.
  • Australian telecommunications companies, and Australian companies generally, be given the same status as 47 Singapore government agencies in relation to procurement tenders and contracts.
  • Each country to ensure that domestic telcos provide timely number portability on reasonable terms.

The objective of seeking non-discriminatory pricing is consistent with the market liberalisation principles of the World Trade Organisation (WTO) Agreement on Basic Telecommunications Services concluded in 1997. This agreement promotes multilateral non-discriminatory market access to the provision of public and private telecommunications services within WTO member nations.

Interconnection disputes in Australia that continue for more than 12 months are not uncommon and the new dispute procedures in the SAFTA will, in practice, require Telstra to publish its interconnection agreements.

The new measures under the SAFTA will benefit both Australian and Singaporean telcos participating in each other's home market through the facilitation of greater transparency by regulators.

In the area of electronic commerce, the key objectives of the SAFTA include:

  • that each country will maintain a legal framework for electronic commerce, based on the UNCITRAL Model Law on Electronic Commerce;
  • promoting electronic commerce, including the legislative recognition of digital signatures;
  • fostering the establishment of a mutual cross-recognition framework for government-level digital signatures;
  • encouraging the interoperability of digital signatures within the business community;
  • promoting government e-procurement;
  • facilitating paperless trading to reduce business transaction costs, particularly the adoption of digital trade documentation and customs procedures; and
  • each country taking appropriate measures in the areas of online consumer protection and personal data protection.

Many of the electronic commerce initiatives flow from the commitments made in the earlier Memorandum of Understanding on Co-operation in Information and Communications Technology, agreed to by both countries in February 1999.

To a greater extent, both countries are already significantly advanced in each of the SAFTA e-commerce initiatives. Singapore is universally recognised as an early technology adopter with well-established paperless trading and electronic procurement services. Equally, Australia has ample evidence of e-commerce utilisation with the added regulatory framework for online consumer and data privacy protection in the Trade Practices Act and Privacy Act.

This reciprocal government initiative to promote procurement by electronic means and acceptance of digital signatures will, however, provide a welcome driver to overcome the initial low adoption of digital signatures in the general community.

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Possible features in US FTA negotiations

Although agricultural trade is clearly at the top of the agenda for the current Australia-United States Free Trade Agreement (AUSFTA) discussions, many of the telecoms and e-commerce trade aspects of the SAFTA will also be relevant to the AUSFTA negotiations.

Recent speculation in the Australian media has focused on the general comments of the US Trade Representative's (USTR) Robert Zoellick in various communications to the US Congress. This has led some to speculate that US trade negotiators will be seeking certain aspects of Australian copyright law to be harmonised with the much stricter anti-technology circumvention provisions under the US Digital Millennium Copyright Act (DMCA). The recent increase in high-profile anti-piracy activities conducted by the Motion Picture Association of America and the Recording Industry of America led many to suggest that their respective influence with US negotiators will be felt in AUSFTA discussions. In particular, the Australian domicile of the operator of the high-profile peer-to-peer file trading network, KaZaa, may also be fuelling US concern for Australian copyright reform.

The USTR's latest annual review of National Trade Estimates for 2002 with Australia may provide some insight into the possible agenda items for US negotiators in the telecommunications and technology area.

The issues raised in the US Trade Estimates report and the public statements of the USTR show that the USTR is clearly interested in strengthening the economic rights of copyright owners and favouring increased punitive measures for copyright infringement, as opposed to reliance on civil remedies. Some of these concerns include:

  • non-ratification by Australia of the 1996 WIPO Copyright and WIPO Performance and Phonogram Treaties;
  • the growing concern of the US motion picture industry about 'unauthorised parallel importation of Zone 1 DVDs from the US'. The passage of the Copyright Amendment (Parallel Importation) Bill 2002 (see our article) on 27 March 2003, which enables the parallel importation of computer programs into Australia, will not have gone unnoticed by the US trade lobby;
  • 'relatively low priority' assigned to intellectual property enforcement by state and federal governments;
  • concern over the 1999 amendments to the Copyright Act in permitting specific reverse engineering and de-compilation of computer software;
  • concern over the 'apparent inability' of the Australian Competition and Consumer Commission (ACCC) to curb 'alleged anti-competitive conduct by the government-owned Telstra, including delays in access to its network and the inflated pricing of its wholesale services';
  • encouraging the full privatisation of the Australian government's remaining 50.1% shareholding in Telstra; and
  • the perception that the measures in the Copyright Amendment (Digital Agenda) Act, enacted in 2001, are weak on anti-circumvention of technological protection measures and ISP liability.

Further insight into the US position can be found in the USTR's Section 1377 review of global telecommunication agreements for 2003, and its March 2003 update, identified certain areas of Australia's telco market that concern US telco industry players, namely:

  • the perceived inability of the ACCC to resolve interconnection disputes involving Telstra, and inefficiencies in the dispute resolution mechanism generally;
  • absence of line sharing;
  • the high wholesale cost of completing calls onto Australian telco mobile networks; and
  • 'unreasonably' high leased line rates.

The report recommends that the ACCC develop benchmarking of rates to ensure compliance with the reasonable access commitments under WTO obligations.

From an Australian viewpoint, a media release by Trade Minister Mark Vaile, stated the objectives of Australian negotiators, which appear to be, in the areas of information and communication technology (ICT), counter-balancing objectives to those of the US. In addition to identifying barriers to ICT trade in the US, the Australian objectives include:

  • addressing licensing constraints on Australian companies in the US telecommunication market;
  • developing shared principles for telecommunications regulation based on key attributes of non-discrimination, transparency, predictability, stakeholder consultation and independence and autonomy of regulators;
  • promotion of charges to the transport layer of the Internet that are fair, non-discriminatory and promote competition;
  • the freedom of Australian legislators to determine the legal regime for the implementation of international intellectual property conventions;
  • addressing variations in telecoms regulatory practice across different states, particularly in relation to interconnection pricing and universal service obligations;
  • addressing the requirement for US Federal agencies to purchase goods and services (including satellite launch services) from US manufacturers or suppliers under the Buy America Act of 1933. Under the Trade Agreements Act of 1979, US agencies are unable to procure goods and services from non-signatory nations to the WTO Government Procurement Agreement (of which Australia is not a signatory);
  • promoting growth of e-commerce in goods and services with the US; and
  • re-affirming the current customs duty-free status of electronic transmissions.

As both countries will no doubt prioritise their trade bargaining positions across the full range of industries according to their respective lobby constituencies, it remains to be seen to what extent the above issues manifest themselves in the final form of any AUSFTA after all cross-industry bargaining and trade-offs are concluded.

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Comment

In an interesting piece of symmetry, the most recently concluded FTAs for both Australia and the US have been with Singapore.

It is likely that many of the SAFTA's less contentious provisions for promoting e-commerce, including the non-taxation of electronic goods, cross-recognition of digital certificates and paperless trade, will also make their appearance in the AUSFTA; as they are largely derivative of similar provisions in the US-Singapore FTA, which was signed on 7 May 2003.

The US concerns of telcoms line access, pricing and resolution of interconnection disputes were also issues raised in the SAFTA, and it would be reasonable to assume that the telecoms chapter of the SAFTA will form a reference point for discussion of telco issues during AUSFTA negotiations.
The US has been quoted on several occasions as regarding many of the provisions of the US-Singapore FTA as a base template for other bilateral FTAs within the Asia Pacific. Indeed, the various digital signature, paperless customs documentation and other e-commerce initiatives are common to both the USTR's and the Australian Government's stated objectives for the AUSFTA.

There are some other notable features of the US-Singapore FTA that may possibly materialise in some equivalent form in AUSFTA discussions, including:

  • as mentioned above, the drafting of punitive anti-technology circumvention provisions that mirror the US DMCA;
  • side letters that clarify the Singapore Government's divestment intentions for its existing ownership interests in two local telcos; and
  • mutual recognition of telecom equipment standards approval, ie Federal Communications Commission test-approved telecoms equipment will not be required to be re-tested by the Singapore Infocomms Development Authority for local sale and vice versa.

The developments in Australia's FTA discussions with the US will no doubt be keenly monitored and any proposed review of wholesale rates and amendment to Australian copyright law will need to be closely watched by local ICT players, particularly the telcos, content providers and ISPs.

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