1. Purpose and structure

The obligations in this Chapter apply to government measures affecting trade
in telecommunications services. However, measures relating to broadcast or
cable distribution of radio or television programming are specifically excluded
from the Chapter (other than to ensure that enterprises operating broadcast
stations and cable systems have continued access to, and use of, public telecommunications
services). There is nothing in the Agreement to compel any enterprise
to establish, construct, acquire, lease, operate or provide telecommunications
networks or services where such networks or services are not offered to the
public generally.

The Chapter builds on WTO rules in relation to major suppliers of telecommunications
that control essential facilities or have a dominant position in a market.
The Parties must prevent anti-competitive conduct and ensure that major suppliers
provide interconnection, resale of designated services, leased circuit services
and co-location of equipment on reasonable, non-discriminatory terms and
conditions.

There are strong provisions on transparency and review for regulatory decisions.
Regulators must be independent and impartial and properly explain decisions,
such as determining which services are subject to regulation and licensing
decisions. Australia and the US have also embraced a hands-off regulatory
approach where markets are functioning competitively.

The Chapter consists of four broad parts, a total of 25 Articles,
and an exchange of letters. The exchange of letters establishes regular consultation
on issues and developments in the communications and IT sectors. This will
give government and industry greater understanding of these dynamic sectors
and enable them to pursue bilateral issues of particular interest. There
is also a non-binding letter associated with the Chapter which outlines the
Government's policy in relation to government ownership of Telstra.

2. Section A: Access to and Use of Public Telecommunications
Services

Both Parties reaffirm their obligations under the WTO General Agreement
on Trade in Services (GATS) which ensure that all enterprises of the other
Party have access to and use of any public telecommunications service, including
leased circuits, offered in its territory or across its borders, on terms
and conditions that are reasonable and non-discriminatory (including with
respect to timeliness).

In accordance with this obligation, both Parties will ensure that enterprises
can freely use public telecommunications services to send information and
access databases, and will only intervene to ensure the security or confidentiality
of messages. 'Confidentiality' will not be used as a means of arbitrary
or unjustifiable discrimination or as disguised restriction on trade in services.
Furthermore, no conditions will be imposed on access to, and use of, public
telecommunications networks or services other than as necessary to safeguard
the public service responsibilities of suppliers (for example, in order to make
their networks or services available to the public generally, or to protect
the technical integrity of the network).

3. Section B: Obligations for Suppliers of Public Telecommunications
Services (PTS)

The commitments in this section are consistent with, and build upon, our
respective GATS obligations and do not require any legislative or regulatory
changes.

In summary, both Parties agree to ensure that suppliers of public telecommunications
services provide:

• Interconnection, directly or indirectly, with the suppliers of public
  telecommunications services of the other Party;
• Number portability (the ability of customers to keep their phone numbers
  when moving from service provider to another) - this applies to fixed
  (i.e. non-mobile) telephony and any other service designated by that Party
  to the extent technically feasible, and on terms and conditions that are
  reasonable and non-discriminatory;
• Dialling parity (the ability of a customer to use an equal number of
  digits to access a similar, competing service, with no unreasonable dialling
  delays) to suppliers of public telecommunications services of the other
  Party, and afford suppliers of public telecommunications services of the
  other Party non-discriminatory access to telephone numbers and related
  services;
• Reasonable and non-discriminatory treatment for access to submarine
  cable systems (including landing facilities) in its territory, where a
  supplier is authorised to operate such a submarine cable system as a public
  telecommunications service.

4. Section C: Obligations for Major Suppliers of Public Telecommunications
Services (PTS)

The commitments in this Section cover obligations on the Parties in relation
to regulating telecommunications companies that control essential facilities
or have a dominant position in a particular market. A supplier will only
be subject to these additional commitments where it is a major supplier for
a particular service. That is, a company which is a major supplier
for most telecommunications services but not, for example, for mobile services,
will not be treated as a major supplier for mobile services.

Both sides also agree to maintain competitive safeguards to prevent suppliers
who, alone or together are a major supplier in its territory from engaging
in, or continuing, anti-competitive practices. They also agree to ensure
that major suppliers of PTS in its territory:

• Accord suppliers of public telecommunications services of the other
  Party no less favourable terms and conditions than such major supplier
  accords in like circumstances to its subsidiaries and affiliates, or any
  non-affiliated service supplier. This applies to the availability,
  provisioning, rates or quality of like public telecommunications services
  and the availability of technical interfaces necessary for interconnection;
• Provide interconnection for the facilities and equipment of suppliers
  of PTS of the other Party at any technically feasible point in the major
  supplier's network, and on non-discriminatory terms and conditions (including
  in relation to quality and timelines;
• Offer reasonable rates for the resale of designated services to suppliers
  of PTS of the other Party and do not impose unreasonable or discriminatory
  conditions or limitations on the resale of such services;
• Offer unbundled network elements on terms, conditions and cost-oriented
  rates that are reasonable, non-discriminatory and transparent. Both
  sides will continue to ensure that they have a regulatory framework for
  unbundling;
• Provide suppliers of PTS of the other Party leased circuits services
  that are public telecommunications services on terms and conditions and
  at rates that are reasonable, non-discriminatory (including with respect
  to timeliness), and transparent. Regulators will continue to have
  the authority to require major suppliers to offer these services at capacity-based,
  cost-oriented prices;
• Provide physical co-location of equipment necessary for interconnection
  or access to unbundled network elements on terms and conditions, and
  at cost-oriented rates, that are reasonable, non-discriminatory (including
  with respect to timeliness) and transparent. Where physical co-location
  is not practical for technical reasons or because of space limitation,
  each Party will ensure that major suppliers facilitate alternative solutions;
  and
• Provide access to designated poles, ducts, conduits, and rights of way
  on terms, conditions, and cost-oriented rates that are reasonable, non-discriminatory
  (including with respect to timeliness), and transparent;

The Chapter also sets out conditions for the public availability of interconnection
offers (an interconnection agreement is the agreement between a facilities-based
supplier to allow a service supplier to 'inteconnect' - or use its
facilities to deliver services - at a certain rate and on certain
terms and conditions):

• Firstly, both sides will ensure each major supplier in its territory
  makes publicly available a reference interconnection offer [RIO], or other
  standard interconnection offer, containing the rates, terms, and conditions
  that the major supplier offers generally to suppliers of public telecommunications
  services.
• Secondly, both sides will ensure that the procedures for interconnection
  negotiations with major suppliers are publicly available and that the
  rates, terms, and conditions for interconnection with a major supplier
  are made publicly available.

The commitments in this Section are consistent with, and build upon, our
GATS obligations and do not require any legislative or regulatory changes. The
commitments on resale, leased circuits, colocation and access to poles, ducts,
conduits and rights of way are additional to our GATS commitments, but similar
to provisions contained in the Singapore-Australia FTA.

5. Section D: Other Measures

In this section we have made a number of commitments which add to our existing
commitments under the GATS. These commitments are consistent with
our existing laws and practices and do not require any legislative or regulatory
changes.

Both Parties agreed to highlight their hands-off regulatory approach to
value-added services, which means that they will not intervene unless necessary
to remedy a practice that the Party has found in a particular case to be
anti-competitive under its law or regulation, or to otherwise promote competition
or safeguard the interests of consumers.

Both Parties are committed to existing practices of independent regulation.
And will continue to ensure that:

• Any telecommunications regulatory body established or maintained is
  independent and separate from, and not accountable to, any supplier of
  public telecommunications service; and
• The decisions and procedures of the regulatory body are impartial by
  ensuring the regulatory body does not hold a financial interest in any
  supplier of public telecommunications services; and that any financial
  interest that the Party holds in a supplier of a public telecommunications
  services does not influence the decisions and procedures of its regulatory
  body.

The Parties have also agreed to notify each other, as soon as feasible,
of any intention to reduce or divest any government interest in a telecommunications
supplier.

Parties have agreed to maintain their approach to transparent and independent
regulatory procedures which incorporates basic principles of natural justice.
Each Party will ensure that rulemakings, processes and conditions of licenses,
reasons for denial or licences, and any tariffs filed with a regulator, are
published or made available to interested persons.

Both sides agree to administer any universal service obligations in a transparent,
non-discriminatory and competitively neutral manner.

The Parties also undertake to administer procedures for the allocation and
use of scarce telecommunications resources, including frequencies, numbers
and rights of way, in an objective, timely, transparent and non-discriminatory
manner, and to make publicly available the current state of allocated frequency
bands (but not the identification of frequencies assigned for specific government
uses). Australia will maintain all existing practices and retain the
right to allocate frequency bands taking into account existing and future
needs. Australia will endeavour to rely generally on a market-based
approach in assigning spectrum for terrestrial non-government telecommunications
services.

Both Parties agreed to maintain their robust frameworks for enforcing their
own laws, and have committed to maintaining some of the basic principles
for resolving domestic telecommunications disputes. Enterprises are
entitled to:

• seek timely review by a regulator or court to resolve disputes;
• seek review of disputes regarding appropriate terms, conditions, and
  rates for interconnection; and
• to obtain judicial review of a determination by a regulatory body

Furthermore, consistent with current regulatory approach, each Party may
forebear from applying regulation to a service upon a strict process of determination
by its telecommunications regulatory body that enforcement is not necessary
to prevent unreasonable or discriminatory practices, to protect consumers
and to enhance competition. However, a Party must give adequate public
notice, and an opportunity to comment, prior to any decision regarding forbearance
and the capacity to obtain judicial review of such decision by an independent
and impartial judicial authority.

6. Exchange of Letters on Consultation

The side letter on consultation commits the Parties to meet once a year,
or as otherwise agreed, and to include industry representatives as may be
relevant, to discuss and resolve any issues and to maintain a forward-looking
and cooperative relationship. Initial subjects for discussion include
developments in market structure, convergence, technological innovation including
in relation to advanced wireless services, Internet charging, voice over
Internet protocol, broadband, number portability, and digital products

7. Letter on Telstra

The side letter on Telstra is a non-binding part of the Agreement. It makes
no commitments but serves to explain the current Government's policy with
regard to Telstra (for an explanation of the different types of side letters
see Chapter 1 on institutional issues). The side letter explains that
the current Government has long been committed to the full sale of Telstra
subject to certain service conditions being met. The letter does not
commit the Government to selling its remaining share of Telstra. Rather,
it explains that the Government had recently tabled a bill in Parliament
proposing the full sale of Telstra which was rejected, and any future sale
would be conditional on such a bill passing through Parliament. The
letter explains Telstra's operational independence, Australia's rigorous
regulatory framework and principles of competitive neutrality which ensure
that government enterprises such as Telstra do not derive any commercial
advantage from having government ownership.

March 6, 2004

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