4. Access to Essential Infrastructure

4.1 The importance of access to infrastructure

Fair and reasonable access by third parties to essential infrastructure facilities such as electricity grids, gas pipelines, rail tracks, airports and communications networks is important for effective competition.

Many infrastructure facilities exhibit natural monopoly characteristics that inhibit competition in related industries. For example, restrictions on access to rail track may prevent competition between different companies seeking to provide rail freight services. Similarly, where a gas producer cannot make use of an existing gas distribution network to reach potential clients, it may be difficult to compete in or even enter the wholesale and retail gas supply markets.

It is generally not economically feasible to duplicate such infrastructure, and given the historic likelihood of vertically integrated owners, it can be difficult for actual and potential competitors in downstream and upstream industries to gain access to these often vital infrastructure services. Even if access is technically available, there may be an imbalance in bargaining power between the infrastructure owner and potential third party users, influencing the terms and cost of access and making entry potentially prohibitive for competitors.

The outputs of these industries are significant inputs to a wide range of economic activities. Where restricted access arrangements result in higher prices or lower service quality, whether through reduced competition and/or limited supply, the impact is felt by businesses and consumers alike.

As a result, governments have given increasing attention to establishing a right of access to these facilities, under established terms and conditions, where privately negotiated access is not expected to be a viable option.

For example, in July 1998, the Government announced a package of reforms in response to a NCC legislation review of the Australian Postal Corporation. Draft legislation to give effect to the Government's postal reform package, which included a postal-specific access regime to be inserted into the Trade Practices Act, was introduced into Parliament on 6 April 2000. The legislation was scheduled to take effect from 1 July 2000. The draft legislation was subsequently withdrawn from Parliament as it did not attract the support necessary for passage.

4.2 Part IIIA of the Trade Practices Act 1974

Clause 6 of the Competition Principles Agreement (CPA) requires the Commonwealth to establish a legislative regime for third party access to services provided by means of significant infrastructure facilities where:

• it would not be economically feasible to duplicate the facility;

• access to the service is necessary in order to permit effective competition in a downstream or upstream market;

• the facility is of national significance having regard to the size of the facility, its importance to constitutional trade or commerce or its importance to the national economy; and

• the safe use of the facility by the person seeking access can be ensured at economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist.

Further, this regime is not to cover a service provided by means of a facility located in a State or Territory that has established an access regime that both covers the facility and conforms with the principles set out in Clause 6, unless the NCC determines that regime to be ineffective in relation to the interjurisdictional impact or nature of the facility.

To give effect to this commitment, Part IIIA was inserted into the Trade Practices Act 1974 (TPA). This part is referred to as the national access regime, and is intended to provide for minimum intervention by the Commonwealth in determining actual terms and conditions of access.

The national access regime establishes three means by which parties may seek access to nationally significant infrastructure services. These are:

• declaration of the infrastructure facility;

- A person can apply through the NCC to have a service provided by a significant infrastructure facility `declared' by decision of the relevant Minister. Where a service is declared, access to the service is able to be negotiated on a commercial basis between the service provider and an access seeker.

- If agreement cannot be reached, the terms and conditions of access can be determined by the ACCC through a legally binding arbitration process. In making an access determination, the ACCC must take into account a range of factors, including the legitimate business interests of the service provider, the provider's investment in the facility and the public interest.

- A decision on an application for declaration can be appealed to the Australian Competition Tribunal (ACT) within 21 days.

• through an undertaking to the ACCC; and

- The operator of an infrastructure service can give a voluntary undertaking to the ACCC, setting out the terms and conditions on which access to that service will be provided. If an undertaking is accepted, this provides a legally binding means by which third parties can obtain access to the infrastructure service. A service that is subject to an undertaking cannot be declared as described above.

• certification of a State or Territory access regime as an `effective regime'.

- State or Territory governments may apply through the NCC to have an access regime certified as effective in relation to a particular service. The NCC then makes a recommendation to the relevant Commonwealth Minister on whether or not to certify the regime. In making a decision, the Minister must consider the NCC's recommendation and apply the relevant principles set out in the CPA.

- Where an effective State or Territory access regime is in place the relevant infrastructure service cannot be declared.

- A decision on an application for certification can be appealed to the ACT within 21 days.

Specific access regimes have also been established for particular infrastructure facilities, including those applying to telecommunications carriers, airport services provided at core regulated Commonwealth airports and for natural gas transmission and distribution pipelines. These regimes may or may not interact with the national access regime.

4.3 Commonwealth activity under Part IIIA

This section identifies those actions under Part IIIA of the TPA involving infrastructure facilities under Commonwealth jurisdiction or requiring a decision by a Commonwealth Minister during 1999-2000.

4.3.1 Western Australian access regime for natural gas pipelines

In November 1997, CoAG endorsed a uniform national access regime for natural gas transmission and distributional pipelines. As part of that agreement, each State and Territory government agreed to submit a regime consistent with the national regime, as it applied in their jurisdictions, through the NCC for certification under Part IIIA of the TPA.

On 15 March 1999, the NCC received an application from the Western Australian Government for certification of the Western Australian regime. The NCC provided the Minister for Financial Services and Regulation with its recommendation on 4 February 2000, supporting the application.

Having considered the recommendation, the Minister for Financial Services and Regulation certified the Western Australian Third Party Access Regime for Natural Gas Pipelines as an effective regime for a period of 15 years commencing on 31 May 2000.