The jungle drums are sending negative messages about the new TCP Code proposed by Communications Alliance.  

What’s it all about?
In a nutshell, the Australian Communications and Media Authority has been calling for stronger telco consumer protections since it completed its ‘Reconnecting the Customer’ enquiry last year. In response, Communications Alliance developed an upgraded version of the current Telecommunications Consumer Protections Code, hoping it would be accepted and registered by ACMA. (That’s how industry codes become ‘legal’.)
But signs are appearing that ACMA might reject the new draft Code as being too soft … despite the fact that it is by far the most demanding code of its type that the industry has ever faced.

ACCC has its say
First, the Australian Competition and Consumer Commission lodged its own submission during the public exposure stage of the code process. In a blunt assessment, ACCC rated the new draft as too little, too late. The regulator was highly sceptical that any consumer protection system based on industry self-regulation would cure the ills that, as far as it and ACMA are concerned, plague the retail telco sector.

A knowing wink from The Age
On 8 January 2012, The Age newspaper ran a piece that reeked of a little inside information from ACMA. Nothing improper, we hasten to say, but the journo clearly has a strong feeling that the proposed new code is doomed.

So what would happen instead?
If the draft TCP Code is binned by ACMA, the authority will draft its own set of rules, called an Industry Standard. Obviously, it would make them even tougher than the proposed code, and the Standard would have the force of law under section 128 of the Telecommunications Act. Apart from other enforcement options, the Federal Court can impose penalties of $250,000 per contravention of an Industry Standard.

Good news and bad news
For telcos and ISPs that were dreading the burdens of the proposed new TCP Code, a delay in the introduction of new rules will be welcome. And an Industry Standard might omit some elements of the draft TCP Code. But overall, we have to assume that it would be significantly tougher on telco retailers than the draft code.

The ERR is used to determine each carrier’s proportionate liability to contribute to funding the Universal Service Obligation, and one late return holds up the whole exercise.

As ACMA Chairman Chris Chapman said at the time:

‘This court decision highlights that ACMA is comfortable with taking action in appropriate circumstances against carriers that fail to meet their regulatory responsibilities.’

CSP Central has previously backgrounded the return and its requirements.

Web Ace is the trading name of Jason Kenneth McKay of Perth, WA.  ACMA says that McKay has been extracting payments from customer credit cards without authority, and failing to refund.

The issue was first publicised on Whirlpool, the Australian internet users’ town square.  In May 2008, Whirlpool user ‘yabbitboy’ posted:

I am signed up to webace’s email only plan ( $60 a year ), I get unauthorized billings by webace 4 times already, 4*$60. I had contacted them by email – never got replied and also tried contacting them by phone – I do speak to them by person to person but they said they are ‘busy’ and say they will call me back which is *******.

ACMA has now used its power to direct McKay not to extract payments without issuing a bill and in accordance with customer authorisation.

Effect of an ACMA direction

We’ve explained before what an ACMA code compliance direction means.  Any further breaches by McKay could cost him $50,000 each.

So will McKay comply ?

As late as last Saturday, Whirlpool user ‘tudorose’ reported another unauthorised debit.  We’ll watch with interest to see whether the customers’ nightmare is really over.

The ERR has a key purpose:  To determine what proportion of the national communications subsidy the client will be required to fund.

It’s a very specialised return and carriers have to get it right … and get it in on time.  No extension is possible.

Telecommunications law expert Peter Moon explains this unique regime.

The national communications subsidy

Australia’s telecommunications law establishes a communications safety net for people in remote or disadvantaged locations.  That’s why a payphone gets installed and maintained in a remote Queensland town and folks in isolated Western Australian hamlets can get a landline.

The law appoints one or more Universal Service Providers (‘USP’) charged with ensuring that basic communications facilities are reasonably available throughout the country on an equitable basis.  In fact, Telstra is now the only USP.

Many services the USP provides are unprofitable.  So the scheme pays it an off-setting subsidy.  The subsidy is funded by all carrier licence holders, in proportion to their communications-based revenue. 

The service obligations imposed on the USP are called the Universal Service Obligation, or ‘USO’ and the subsidy is the USO subsidy.

Fixing the amount of the USO subsidy

Each year, the Communications Minister sets the amount of the USO subsidy, exercising power under the Telecommunications (Universal Service Levy) Act 1997 (‘USO Act’).  The 2008/9 USO subsidy was about $145 million.

Sharing the USO burden

The USO subsidy is funded by the communications industry.  Specifically, every holder of a carrier licence – there are nearly 200 of those at present – during any part of the ERR period is liable to contribute.

Once every carrier has lodged an Eligible Revenue Return, ACMA is in a position to determine the aggregate industry revenues and the proportion attributable to each carrier. 

That’s why there is no provision for an extension of time to lodge a return.  The entire rating process would be stymied while stragglers complied with their obligation.  Director penalties apply for failure to lodge strictly on time.

Eligible revenue

Broadly, the ERR must show the revenue derived from communications activities excluding certain items, such as revenue from:

• activities conducted outside Australia
• supplying, installing, insuring or maintaining customer equipment
• providing content for a content service
• constructing, installing, maintaining, or managing the construction or installation or maintenance, of the infrastructure of a communications network
• inter-carrier input payments such as interconnection payments.

Importantly, eligible revenue is not limited to revenue that depends on holding a carrier licence.  If you hold a  licence, a wider range of revenue is ‘eligible’ than simply the component (if any) they could not have earned if they had no carrier licence.

Corporate groups

A group in which one member holds (or has held, during the return period) a carrier licence may have to declare eligible telecommunications revenues earned by all its members. 

Grouping arises when entities satisfy the criteria of ‘Declared Related Parties’ in the Telecommunications Universal Service Obligation (Eligible Revenue) Determination.  In a broad sense this is a ‘standard’ grouping provision, but its detail is unique to the communications regime, and is flexible.  That is deliberate.  When there are only 200 or so potential ‘tax payers’ from whom $145 million is to be raised, a gap in the grouping provisions could create a huge distortion.

Here are some key elements of the grouping regime:

(1) An entity is a declared related party for the whole of an eligible revenue period if it:

(a) is not: (i) a participating person; or (ii) a consolidated related party in relation to a participating person; and

(b) is owned, at any time during an eligible revenue period, by a body that owns a participating person at any time during the same eligible revenue period; and

(c) has telecommunications sales revenue in Australia at any time during the same eligible revenue period.

(3) For subsection (1): (a) a body owns a declared related party or a participating person if the body has company interests in the declared related party or participating person that are greater than 49% of the declared related party or participating person; and (b) company interests may be traced in the same manner as company interests may be traced for Part 4 of Schedule 1 to the Broadcasting Services Act 1992.

It’s complex.  Call Peter Moon of Cooper Mills Lawyers if you need assistance on USO subsidy grouping.

Delayed reaction

Eligible revenue is assessed for the financial year before the USO claim period i.e. the year for which the USP is to be reimbursed. So contributions for  2009/10 are based on revenue for 2008/9.

The good news for smaller carriers

Normally, an ERR must be accompanied by an independent auditor’s report.  But in many cases, the cost of a specific USO audit report is out of proportion to revenue derived from communications activities. 

Be aware that ACMA can, and will, grant an audit report exemption in appropriate circumstances.  Last year, exemptions were allowed in roughly a third of cases.

ACMA says:

 The ACMA has previously given audit waivers where the carrier was in liquidation or external administration, or in circumstances where the carrier did little or no trading and it was clear that the likely USO levy contribution might not outweigh the costs of the audit and there was little or no risk of error in the Return.

The ACMA may refuse to grant audit waivers for a number of reasons, such as where larger amounts of revenue are involved or where it considers there is risk of an incorrect Return being submitted.

But note that where you are otherwise required to prepare audited financial statements under the Corporations Act 2001 or any other legislation, their ERR Return must be based on audited financial statements, even if you get an exemption from the requirement for a specific USO subsidy audit report.

You can apply for an exemption in writing when lodging their ERR but it’s best to make early contact with ACMA staff to clear the path.

Summing up

The requirement to lodge an Eligible Revenue Return affects only a couple of hundred Australian businesses.  Those it applies to need expert guidance.  Above all, allow plenty of time to come to grips with this unique regime if you haven’t had experience with it.

To demystify the topic, here’s a dowloadable SFoA backgrounder that overviews what they are and why they can improve CSP business processes, with the compliments of CSP Central and Logie-Smith Lanyon Lawyers

You should also check out this post about complying with the SFoA Summary notification regime.

The industry was already expecting the Mobile Premium Services Code, which was finalised a few months ago and will take effect on 1 July 2009.

But in a move ACMA hopes will be decisive, it has revealed three other weapons in the battle against shonky premium SMS outfits.
 
ACMA to make ‘service provider determinations’

Under section 99 of the Telecommunications Act 1997, ACMA can make ‘mini-laws’ for carriage service providers on a range of topics.  They’re called ‘service provider determinations’.  ACMA proposes to make three new rules.

‘Do not contract’ rule

A register of premium SMS content providers and aggregators will be established.  Obviously, the rules for listing on the register will be aimed at keeping the shonks out – especially the shadowy offshore operators.

ACMA’s rule will then ban mobile carriage service providers and aggregators from contracting with content providers and aggregators who are not on the register.

‘Do not bill’ rule

ACMA’s rule will ‘sin bin’ content providers and aggregators responsible for serious breaches of the Mobile Premium Services Code for a specified period.  They won’t be allowed to operate in the Australian market for their penalty period.

‘SMS barring’ rule

ACMA’s new rule will mandate universal ability for customers to bar premium SMS messages by July 2010.

Our take on it

This can work. 

Combined with the Mobile Premium Services Code and existing powers under the Spam Act and the Trade Practices Act, the new service provider determinations have the capacity to clean up the premium SMS industry.

We only hope the new determinations won’t contain loopholes that allow existing arrangements to continue or permit Australian mobile operators from continuing to collect for pariah operators in any circumstances.  If ACMA covers those issues, it’s a great job.

Over recent weeks, many reports have emerged of the ACMA internet filtering trial black list having been published on different websites, potentially compromising the Government’s current internet filtering trials. One such website was www.Wikileaks.de.

Wikileaks had been known for its collection of leaked documents, which in most cases lead to great controversy.  According to ARS Technica:

Wikileaks has built up an impressive portfolio of leaked documents like those from secretive religious organizations, congressional reports, specs for military hardware capable of jamming IEDs used by insurgents in Iraq, and even its own donors list. In doing so, it has found few friends in governments and courts, with one judge even ordering its DNS record be erased after documents from Swiss Bank Julius Baer were uploaded to the site.

ARS Technica have also reported that German police raided the residence of the domain name registrant Theodor Reppe of Dresden, Germany who denies any involvement in the posting of leaked documents. It is reported that the raids came shortly after the ACMA blacklist was published. It is unknown at this stage, what involvement if any, ACMA had in closing down this website.

Wikileaks.de now resolves to a generic DENIC page. Despite the action taken by DENIC another mirror site, which is hosted on an alternate TLD, still shows links to different versions of what they claim is the secret ACMA black list.

The warning comes after disputes were alleged to have remained unresolved, as a consequence of this ISP’s refusal to comply with the TIO Scheme.

According to ACMA:

The TIO referred this matter to ACMA because Bytecard had failed to cooperate with the TIO in relation to two continuing matters. Both the TIO and ACMA have made attempts to encourage Bytecard to voluntarily comply with the TIO Scheme, without success.

ACMA’s power to direct compliance

Part 6 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 imposes obligations on Carriers and CSPs (who are referred to as eligible carriage service providers, as defined by s127) to:

1. Enter into the TIO Scheme; and
2. Comply with the TIO Scheme.

Eligible carriage service providers are defined by s127 as:

(a) a carriage service provider who supplies:

(i) a standard telephone service, where any of the customers are residential customers or small business customers; or

(ii) a public mobile telecommunications service; or

(iii) a carriage service that enables end users to access the Internet; or

(b) a carriage service intermediary who arranges for the supply of a service referred to in subparagraph (a)(i), (ii) or (iii).

In this instance, ACMA’s formal warning came about because of the alleged failure of ByteCard (who is an eligible carriage service provider) to comply withe TIO Scheme in breach of Part 6 of the Act.

We have previously examined issues with the TIO Scheme and frustrations that some CSPs encounter, but the law is the law, unless a CSP is exempt (under s129) they must comply with their obligations under Part 6.

Part 13 of the Act requires that Carriers, CSPs, their employees and contractors protect the confidentiality of protected information such as the content of communications, the affairs and personal particulars of people and namely the integrated public number database. The offences under this part are contained in sections 276 to 278, and can include a penalty of imprisonment against offenders.

s292(1) of the Act allows regulations to be made that provides for circumstances in which there may be exceptions to the offences under sections 276 to 278.

Although the Act already allows disclosure of documents and information in cases of threat to life or health (s287) in very limited situations, the Telecommunications Amendment Regulations 2009 (No.1) provides for an exception for the purpose of:

1. preventing or lessening a serious and imminent threat to the life or health of a person or a class of persons; or
2. ensuring that effective arrangements are in place to deal with such threats

The Explanatory Statement to these new Regulations states that:

The primary purpose of the Regulations is to allow emergency management authorities in each state and territory to obtain phone numbers and personal particulars (including any unlisted telephone or any address) of all the database listings for their respective state or territory for the purpose of ensuring effective arrangements are in place to deal with serious and imminent threats to life and health of persons. Such threats may emanate from natural disasters (such as bushfires and floods), criminal acts and non natural disasters (such as industrial accidents).

The Regulations permit disclosure of either (a) the information in an integrated public number database; or (b) a document that consists or relations to information contained in the integrated public number database.

Before disclosure is permitted there are 3 requirements that an authorised person must meet, these are:

1. certify to Telstra that the disclosure and use of the information is required for the two permitted purposes (as set out above); and
2. identify the recipient of the information; and
3. provide Telstra with an undertaking that (a) any disclosure or use by a person other than Telstra or an employee of Telstra will be fore the same purpose; and (b) reasonable steps will be taken to ensure that any disclosure or use by a person other than Telstra or an employee of Telstra will not adversely affect the operation of Telstra telecommunications network;

There are also a number of safeguards requiring destruction of information when no longer required, and authority for the Privacy Commissioner to monitor the use of the information or documents.

The team at CSP Central, and some of our readers recently received an emergency communication from the Victoria Police, which took advantage of these new Regulations, by way of an SMS warning of:

Extreme weather in Vic expected Mon night & Tues. High wind & fire risk. Listen to Local ABC Radio for emergency updates. Do not reply to this msg.

This Regulation will in our view play an effective role in undertaking mass communication in cases of emergency such as bushfire or flood.

And you mustn’t allocate a standard telephone number to a service that doesn’t terminate in the local area the number is intended for.

It’s also simple for customers to bypass both rules, since the majority of VoIP providers couldn’t care less about breaking them.

A new ACMA discussion paper suggests that enforcement action may be on the way.

Non-compliance is no secret

Everybody in the game knows that it’s easy to obtain a Darwin number that really terminates in Melbourne or a Perth number that rings in Sydney.  In fact, a VoIP provider that couldn’t service these requests would be regarded as useless by many customers.

How do you get a so-called ‘geographic number’ that isn’t tied to the location it’s nominally issued for ?  Just phone a VoIP provider and ask.  You’d be unlucky to strike one that declines.

ACMA research proves the point

In May and June 2008, ACMA checked out 46 Australian VoIP service providers and discovered (surprise, surprise) that all except one would provide service with an end user number that belonged to a different location.

Subscription processes for … these services were examined in detail. In all cases, except one, geographic numbers were issued to customers for locations other than the geographic location of the customer’s service. In the research a Clayton (Vic) based customer automatically received numbers from the Melbourne Standard Zone Unit (SZU), the Perth SZU and the Sydney SZU. A Ringwood (Vic) based customer was able to request numbers in Alice Springs, Brisbane, Perth and Sydney. In addition, ACMA investigated a selection of the IPND records for these services. The results suggested further problems with non compliance.

ACMA has no evidence that would suggest the results for those providers not examined in detail would be markedly different. Rather the non compliance that this research identifies appears to be evidence of a systemic problem.

What’s ACMA going to do about it ?

First, educate

The discussion paper is partly intended to remind service providers of the Numbering Plan and its rules.

Second, reform

ACMA is considering regulatory changes that will clarify and perhaps simplify compliance.

For instance, one possibility under consideration is a ‘Small Provider Integrated Number System, (‘SPINS’) that would allow small service providers to obtain single telephone numbers from ACMA or an outsourced provider rather than by the current arrangement of sourcing number from an upstream provider.

SPINS would be a good outcome, but ACMA indicates it’s only an option if the industry registers broad support.

This would discipline number allocation by creating a direct link between small providers and ACMA.  At present, many of them are invisible to ACMA, separated by upstream providers who share their numbering allocations with them.

Third, enforce

The discussion paper makes it clear that the Numbering Plan will ultimately be enforced, perhaps even by withdrawing numbers allocated to non-compliant service providers.

Comments on possible reforms are invited

Submissions must be received by ACMA by 28 February 2009.

Submissions must be sent to:

Manager Telecommunications Licensing Numbering and Subcables Section

Email          numbering@acma.gov.au ; or

Mail             Australia Communications and Media Authority

PO Box 13112, Law Courts

MELBOURNE VIC 8010

Our take on it

Based on its research findings, ACMA could have justified a ‘big stick’ response.  But it has shown its support for a diverse VoIP market by taking a measured, cooperative approach.

However providers that are building a business on flouting the underlying principles of the Numbering Plan, and especially the rule that geographic numbers need to support services situated in the zones they are listed for, are ultimately doomed.  They will be pulled out of service before too many months have passed.