Regulatory Observer Issue 39 19 June 2012

Issue 39, 19 June 2012

Contents

BEREC Releases Report on International Roaming 1 International Regulatory Round-up 2 Australian Regulatory Round-up 6

BEREC RELEASES REPORT ON INTERNATIONAL ROAMING

The Body of European Regulators for Electronic Communications (BEREC) has released a report on international roaming services in Europe (the Report). The Report compares regulated tariffs (Eurotariffs) for voice, SMS roaming and data roaming, with unregulated prices. It found that in more than half of European Union (EU) States, the average price of unregulated incoming calls was more than twice the price of calls subject to Eurotariffs. International roaming services were first regulated in Europe in 2007. The price of voice calls at the wholesale and retail level were capped. Provisions were introduced to ensure consumers were better informed. Amendments in 2009 provided for a yearly decrease in the caps, price regulation for wholesale and retail SMS roaming services, and price regulated data roaming services at the wholesale level. The regulations also provided that unregulated tariffs may be offered to consumers, alongside Eurotariffs. This allows suppliers to offer services that respond to changing patterns of demand. That is, it allows for the possibility of a wider choice for consumers. The Report found that unregulated, non-Eurotariff charges applied to 26.8 per cent of calls made, and 29.1 per cent of calls received, in the second half of 2011. The Report suggests that it may be necessary to ensure that clearer information is provided to consumers about the relative benefits and costs of the regulated versus the unregulated services. In contrast, the Report notes that the market for data roaming may be subject to stronger market forces compared to the markets for voice and SMS services. For example, the availability of WiFi may act as a partial substitute to data roaming. However, full competition in this market is not expected in the short-term. An OECD report released in 2011 compared the costs of international mobile data roaming in the OECD area. The cost of the usage of 20 MB in a single session on a single day was less than US$30 for travellers from Ireland, Spain and France. The OECD average for the usage of 20 MB was US$119.60. Prices for travellers from Chile (US$301.00), Poland (US$250.69) and Australia (US$212.42) were above the OECD average.

1 INTERNATIONAL interference rights, as well as the efficient REGULATORY ROUND-UP licensee, for the yet-to-be auctioned spectrum. Airports US: Connect2Compete Adoption Pilot Oceania Program The FCC and Connect2Compete (C2C) has NZ: Commission Releases Process and updated the progress of an effort to provide Issues Paper For Review of Airport eligible students in San Diego with a $9.95 Services monthly broadband service together with The New Zealand Commerce Commission discounted computers. The C2C San Diego (NZCC) has released a process and issues pilot program is designed to test a proposed paper to review information disclosure national broadband adoption initiative that is regulations in the airports sector. The review expected to launch across the US later in will consider how effectively the regime is 2012. The pilot program runs across six San promoting the purpose of Part 4 of the Diego County school districts, comprising 56 Commerce Act 1986 in relation to specified schools, and nearly 39,000 students. One- airport services provided by Auckland third of Americans, approximately 100 million International Airport Limited (AIAL), people, do not have access to broadband Wellington International Airport Limited services at home. In South Korea and (WIAL) and Christchurch International Airport Singapore, access to broadband exceeds 90 Limited (CIAL). WIAL has recently set new per cent. A Federal Reserve study suggests prices for airport services. Both AIAL and that students with a PC and broadband at CIAL are expected to set new prices later this home have six to eight percentage point year. higher graduation rates than students who do not have home access to the Internet. Communications US: FCC Dedicates Spectrum Enabling Americas Medical Body Area Networks The FCC has adopted rules to introduce US: FCC Releases Working Paper on Medical Body Area Networks (MBANs). Allocating Interference Rights MBANs are low-power wideband networks The Federal Communications Commission that consist of body-worn sensors that (FCC) has released a Staff Working Paper transmit patient data. MBANs allow the that examines alternatives to current monitoring of patients in a healthcare administrative process that are designed to institution. Clinicians can then have access to produce an efficient allocation of signal real-time, accurate medical data. Wireless interference rights. The paper shows how the devices that operate on the MBAN spectrum efficient allocation of rights can arise from a can be used to actively monitor a patient’s multi-player game embedded into an auction, health. This includes monitoring blood where participants place bids reflecting the glucose and blood pressure levels, benefit or harm they would expect to incur electrocardiogram readings, and readings due to signal interference. The Staff Working from neonatal monitoring systems. Paper also identifies an efficient set of

2 auction that will occur in the event that there is excess demand for the licences. This US: FCC's Final Plan for Retrospective system allows bidders to make packaged Analysis of Existing Rules bids over multiple rounds of bidding within a The FCC has prepared a Plan for prescribed timeframe. The deadline to apply Retrospective Analysis of Existing Rules (the for a licence is 20 July 2012. Plan). The Plan is in relation to a review of Ireland: Memorandum of Understanding existing rules to determine whether the rules with the UK on the 800 MHZ band should be modified or eliminated in light of changing markets and changing technological The ComReg has released a Memorandum conditions. The Communications Act of Understanding (MoU) in relation to requires the FCC to review regulations that procedures for the coordination of radio apply to telecommunications service services, other than broadcasting, between providers every two years. The FCC must the Republic of Ireland and the United determine whether the regulations are ‘no Kingdom in the frequency band 790 – 862 longer necessary in the public interest as the MHz. In order to facilitate the deployment of result of meaningful economic competition systems operating in neighbouring countries, between providers of such service.’ it is necessary to establish regulatory and Following the review, the FCC is required ‘to technical procedures for frequency co- repeal or modify any regulation it determines ordination. The MoU is designed to reduce to be no longer necessary in the public the administrative procedures in the interest.’ frequency bands in the UK and in Ireland.

Europe UK: Fixed Narrowband Market Review and Network Charge Control Ireland: ComReg reports on An Post’s The Ofcom is seeking stakeholder views on Quality of Service Performance between its review of fixed narrowband telephony January and March 2012 services. This includes the proposed scope ComReg has published a report in relation to of the review, the approach the Ofcom should An Post’s quality of service performance. The adopt in assessing competitive conditions in report finds that for the period 1st January to fixed narrowband markets at both a retail and 31st March 2012, 85 per cent of single piece wholesale level, and how these markets have priority mail was delivered throughout the changed since the last review in 2009. The State on the following working day after closing date for responses is 28 June 2012. posting. Further, 98 per cent of this mail was delivered within 3 working days. This is equal UK: Options for the Future of to the result for the same period in 2011. Commercial TV Public Service Broadcasting Licences Ireland: ComReg Commences Multi- The Ofcom has published a report on options Band Spectrum Award Process for the future of public service broadcasting The Commission for Communications TV licences held by ITV, STV, UTV and Regulation (ComReg) has announced a Channel 5. The current Channel 3 (ITV, STV process to auction licences for advanced high and UTV) and Channel 5 licences expire at speed fourth generation (4G) mobile services. the end of 2014. The Ofcom’s report The process includes a combinatorial clock considers whether the existing licence holders will be able to contribute, at a 3 commercially sustainable cost, to public TVNZ and Sky that it had found no likely service broadcasting in the 10 years from breach. 2015. The Ofcom has outlined three options for the licences: renew existing licences; auction new licences; or extend the current licences. The Ofcom argues that any of the three options are credible. The final decision will be made by the Secretary of State.

Oceania

NZ: Commerce Commission Identifies Factors Likely to Affect the Uptake of High Speed Broadband The NZCC has released a draft report that identifies factors that affect the uptake of high speed broadband. The NZCC is seeking submissions from interested parties on the draft report. The two main areas identified are costs relating to connecting and using high speed broadband, and the availability of video-on-demand services. The report found that rural users have the same appetite for high speed broadband as urban users. The report also suggests that potential issues regarding data caps, backhaul capacity, and internet protocol interconnection are likely to be resolved by market forces.

NZ: Igloo Unlikely To Lessen Competition The NZCC has completed an investigation into the joint venture between Television New Zealand Limited (TVNZ) and Sky Network Television Limited (Sky). It found that the pay TV market will not be less competitive as a result of the venture. In November 2011, TVNZ entered into a joint venture agreement with Sky to launch a new low-cost subscription TV service, known as Igloo. The NZCC received a number of complaints that the joint venture had the potential to substantially lessen competition. It opened an investigation to determine whether there was any likely breach of sections 47 or 27 of the Commerce Act. The NZCC has advised 4 Energy US: FERC Denies Rehearing of Transmission Planning and Cost Americas Allocation Rule The FERC has upheld a decision to reform US: FERC-NERC Report on Northeast Transmission Outage Stresses the transmission planning and cost allocation Vegetation Management methodology. The FERC found that existing requirements are inadequate because they A report by the Federal Energy Regulatory are neither efficient nor cost-effective for Commission (FERC) and North American users of the grid. The July 2011 final rule Electric Reliability Corporation (NERC) has established new minimum criteria that a found that damaged electricity distribution transmission planning process must satisfy, lines in the US were the major cause of the in relation to cost allocation methods. For widespread North-eastern customer outages example, transmission planning requires the during the October 2011 snowstorm. The development of regional plans, consideration FERC is the federal agency that oversees of transmission needs provided by state and reliability of the US transmission grid. The federal laws, and coordination between pairs report found that nearly three-quarters of the of neighbouring transmission planning transmission line outages occurred when regions. healthy trees fell onto the lines. The trees were uprooted because of a combination of Europe the weight of the snow and because of soft, wet ground. The report provided Northern Ireland: Regulator Consults on recommendations designed to reduce the Gas Licence Fee Methodology adverse impacts of weather events on the The Utility Regulator has published a transmission system. consultation to review the principles underpinning the methodology by which US: FERC Approves Policy Outlining its annual gas licence fees are calculated. The Role in EPA’s New Mercury Rule current principles have been in place since 31 The FERC has released a policy statement March 2003 and were reviewed in November outlining how it will advise the Environmental 2008. The aim of the review is to produce a Protection Agency (EPA) in response to methodology that will provide a requests by electricity generators to comply straightforward calculation of the licence fee, with the new mercury and air toxic standards. while taking into consideration the current The EPA rules provide generators with three structure of the gas market. The consultation years to comply. Some generators will be closes on 22 June 2012. eligible for a one-year extension and an additional year to meet specific reliability Northern Ireland: Consultation on concerns. The FERC’s policy statement is in Access Regime for Proposed Gas relation to providing advice to the EPA in Storage Facility relation to the final year for generators to The Utility Regulator has published a comply. A decision to grant additional time is consultation paper on the access regime for a determined by the EPA. proposed gas storage facility in Northern Ireland. Islandmagee Storage Limited (IMSL) has applied for a licence to store gas in a proposed gas storage facility in the Larne

5 lough area. The IMSL has requested that a Draft legislation has been released that use-it-or-lose-it (UIOLI) condition is not proposes to reform the electricity market in included in the licence. A UIOLI condition the UK. The legislation provides a new requires that unused storage capacity is system of low-carbon generation revenue made available to other parties seeking to support through the introduction of a feed-in use the facility. The consultation closes on tariff. This will stabilise returns for 18 June 2012. generators. Second, the draft legislation will create a Capacity Market to ensure there is Northern Ireland: Decision Paper sufficient capacity to meet demand. In Published On ‘Regulatory Approach to addition, there will be an Emissions Energy Supply Competition’ Performance Standard that will prevent The Utility Regulator has issued a final construction of new coal plants that emit high decision on the regulatory approach to volumes of CO2. Finally, a carbon price floor energy supply competition in Northern will be introduced, that places an initial value Ireland. The paper provides a high-level on the price of carbon of around £16/tCO2 policy position in relation to the regulation of (2009 prices) in 2013. This will rise to energy supply markets over the next three £30/tCO2 (2009 prices) by 2020. years. It includes consideration of: retaining maximum retail tariffs and price controls on Oceania dominant incumbent suppliers; disaggregated NZ: Court of Appeal Confirms analysis on retail market sub-sectors for Commerce Commission Decision To Not monitoring purposes; a continuation of Set Input Methodology quarterly retail market monitoring; and proposals to improve the relationship The New Zealand Court of Appeal has between wholesale and retail markets. handed down a decision finding that the New Zealand Commerce Commission (NZCC) is UK: Geothermal Power from Icelandic not required to determine a starting price Volcanoes Could Supply Electricity to input methodology for electricity distribution the UK and gas pipeline services. This overturns a The UK and Iceland have signed an High Court decision in September 2011. The agreement that could allow for geothermal decision also provides guidance in relation to power from Iceland’s volcanoes to supply identifying the boundary between input electricity to the UK. The UK and Iceland methodologies and price-quality paths. It agreed to: exchange information on the also allows the NZCC to reset the current development of the deep geothermal sector price-quality path for electricity distribution in the UK, including in the supply of heat to businesses. district heating networks; developing electricity interconnection between Iceland AUSTRALIAN REGULATORY and the UK; and work together towards ROUND-UP International Development on renewable energy projects in developing countries with a Communications special focus of those in East Africa.

UK: Electricity Market Reforms Proposed

6 ACCC Proposes to Authorise NBN Co / Information in the National Electricity Optus HFC Subscriber Agreement Market The AER has amended Compliance Bulletin The Australian Competition and Consumer No. 3 in relation to the manner it issues Commission (ACCC) has issued a draft warnings as part of its monitoring and determination proposing to grant enforcement of non-compliant offers, bids authorisation for an agreement between NBN and rebids in the National Electricity Market. Co and SingTel Optus. The agreement The Compliance Bulletin was silent on how provides for the migration of Optus’ HFC the AER would treat portfolio bidding subscribers to the NBN and the performed by the same trading team. The decommissioning of parts of Optus’ HFC amendments provide that, for the purposes of network. Under the Competition and administering the three stage process and Consumer Act 2010, the ACCC may issuing warnings, the AER will rely on the authorise arrangements where it is satisfied cumulative count of non-compliant bids for all that public benefits outweigh any public generating units under the same portfolio. detriment likely to result from the This is irrespective of whether these arrangements. generators are different registered participants or exist as separate legal entities. Energy AER approves 2012–13 Electricity Roma to Brisbane Pipeline - Revised Distribution Pricing Proposals (Non- Access Arrangement Proposal Victorian Distributors) The AER has approved pricing proposals On 25 May 2012, APT Petroleum Pipelines made by non-Victorian distribution network Pty Ltd (APTPPL) submitted a revised service providers (DNSPs). The AER access arrangement proposal for the Roma determined that the proposals are compliant to Brisbane Pipeline (RBP) for 12 April 2012 with the National Electricity Rules (NER) and to 30 June 2017. The revised access the relevant distribution determination. It also arrangement proposal was submitted in determined that all forecasts associated with response to the AER’s draft decision on the the proposals are reasonable. Under the access arrangement for the RBP issued on NER, DNSPs are required to submit an 30 April 2012. Submissions on the revised annual pricing proposal which contains access arrangement proposal and the AER’s proposed tariffs to take effect in the next draft decision close on 25 June 2012. regulatory year (2012-13). These tariffs typically form around 40-50 per cent of a AER Publishes First Newsletter - AER customer’s total electricity bill. The DNSPs Energy Update were: ActewAGL (ACT); Aurora Energy (TAS); Ausgrid (NSW); Endeavour Energy The AER has launched its inaugural edition of (NSW); Energex (QLD); Ergon Energy (QLD); its newsletter , the AER Energy Update. It Essential Energy (NSW) and ETSA Utilities includes analysis of: effects of the (SA). introduction of the National Energy Retail Amendment to Compliance Bulletin No. Law, that transfers a number of retail 3: Monitoring and Enforcing Compliance functions from state and territory regulators to of Electricity Offer, Bid and Rebid the AER from July 2012; the recent review of

7 network charges in Queensland and issue has been examined publicly in Tasmania; and recent decisions by the Australia, and the first time NSW customers Australian Competition Tribunal on energy have been surveyed about the value they networks. place on a reliable supply of electricity. The draft report suggests that cost savings of up Energy Market Arrangements for to $2.5 billion over 15 years are possible if Electric and Natural Gas Vehicles the level of distribution reliability is reduced in The AEMC has published the AECOM’s Final NSW, with limited impact on outages for Advice (the Advice) in relation to the impact customers. of electric vehicles and natural gas vehicles AEMC Publishes Issues Paper on NEM on Energy Markets. The Advice presents Financial Market Resilience Advice findings in relation to the estimated uptake of electric vehicles (EVs) and natural gas The AEMC has published a consultation in vehicles (NGVs) until 2030 in the National relation to the resilience of the financial Electricity Market (NEM) and Western relationships and markets that underpin the Australia’s SWIS. It also estimates the operation of the NEM. The Standing Council impact of EVs on peak demand and costs, in on Energy and Resources (SCER) has terms of network and generation upgrades, requested advice from the AEMC on risks to under a set of EV charging scenarios. It also the efficient functioning of the NEM arising examines benefits of EVs on the electricity from financial interdependencies between market and estimates the impact of NGVs on market participants, as a result of their the gas markets. exposure to a common spot price and hedging arrangements. Draft Determination Made on Potential Generator Market Power in the Consultation Paper Published on NEM Connecting Embedded Generators

The AEMC has published a draft The AEMC has initiated a rule change determination on the Major Energy process in response to a rule change request Users’ rule change request in relation to by ClimateWorks Australia, Seed Advisory potential generator market power in the and the Property Council of Australia. The NEM. The draft determination proposes rule change request seeks to reduce the time to make no rule in respect of the rule and costs to connect embedded generators change request. Requests for a public to a distribution network. The AEMC has hearing closed on 14 June 2012. published a staff consultation paper. Submissions on the draft determination Submissions close on 9 August 2012. close on 20 July 2012. ACCC Not to Oppose AGL's Acquisition Draft Advice for NSW Government on of Loy Yang Power Reliability Options for Electricity Distribution The ACCC will not oppose the proposed The AEMC has sought submissions in acquisition by AGL Energy Limited (AGL) of relation to a draft report that examined the Great Energy Alliance Corporation Pty tradeoffs between cost and reliability of Limited (GEAC), which owns Loy Yang electricity in NSW. It is the first time that this Power (LYP). LYP is the owner of the Loy Yang A power station. The ACCC 8 considered whether the aggregation of AGL that strong competition provided by all the and LYP's generation assets would likely remaining generators as well as potential for result in a substantial lessening of investment in new generation would likely competition in markets for the wholesale preserve competitive tension in the market. supply of electricity. The ACCC concluded

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