The Abbott government has rightly focused on red tape reduction and deregulation.
But Communications Minister Malcolm Turnbull could well preside over one of the largest increases in the regulatory burden since the telecommunications market was liberalised two decades ago.
At the very moment when Turnbull seems to have cleaned up the mess that was the national broadband network, his mandatory data retention policy puts the entire competitive dynamic of the Australian telecommunications sector at stake.
Terrorism is a very real problem. The existence of the Islamic State in Iraq and Syria has heightened the terror threat. If there are serious gaps in our anti-terror law framework, they should be filled. The government has spent the past six months doing so.
However, the data retention bill the government has put forward – which requires telecommunications providers to store masses of data on their customers for no other purpose than if a law enforcement agency or regulator wants to have a look at it in the future – is not a targeted anti-terror law.
If data retention is just for terrorism, the government could legislate to ensure it was just for terrorism. But from what we know, both the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission are likely to get access to the new data.
Indeed, over the half a decade that data retention has been debated, its most fervent advocates have been economic regulators, not counter-terror agencies.
One draft data set (even as Parliament is set to vote on the bill, we still don’t know what the final data set to be retained will be) included a requirement to store records of “download volumes” for two years. What anti-terror benefit would that add? Download volumes would useful in copyright infringement cases.
The threat data retention poses to privacy has been widely discussed. But data retention is, first and foremost, a new economic regulation. So let’s treat it as sceptically as we would any increase in the regulatory burden on business.
Prime Minister Tony Abbott has said that the cost of data retention would be around $300 to $400 million, or just 1 per cent of the total revenue of the telecommunications industry.
This is a very significant amount of money. Telcos are already some of the most highly regulated firms in the country.
Turnbull has suggested government will contribute substantially to the cost of implementing data retention. But whether we pay for data retention through internet bills or just general taxation, we’ll still pay for it.
This new burden could dramatically reshape the telecommunications sector. All else being equal, large firms, with their well-established regulatory teams, are able to comply with new regulation much easier than small firms, which lack the economies of scale to absorb costs.
The unfortunate result of burdensome regulation is push smaller firms out of the market, reducing competition as they disappear. Less competition will, in the long run, result in higher prices.
In the case of data retention, it isn’t just size however that matters. Some telcos have more complex networks and technologies and legacy systems – think of Telstra – for whom imposing these new requirements might be disproportionately expensive.
Turnbull and Attorney-General George Brandis claim that mandatory data retention will require telcos to store no more data than some firms do already – just store it for a bit longer.
It’s not clear which firms they’re referring to. The entire industry has been up in arms about data retention. The proposed policy is not just a minor extension of existing practice.
Nevertheless, there’s a reason some telcos store data more than others. The smallest internet service providers survive by keeping their data storage and infrastructure costs as low as possible, hoping to pull customers away from the big firms with lower prices or better service.
For the law enforcement and regulatory agencies that have spent the past six years lobbying for data retention, regulatory compliance costs are an abstract second-order issue.
But for internet users and taxpayers, who will be charged higher prices by a declining number of internet service providers, the economic effect of mandatory data retention is a big deal.