Australian Politics and Policy - Senior, 2019a

Australian Politics and Policy
government and industry agencies may regulate firms concerning different
issues, such as security cameras in taxis or pricing of consumer goods and services.
Types of regulation may be classified along a spectrum based on the extent
of government intervention in the industry, ranging from government ownership
and command and control to self-regulation and co-regulation, to incentives-based
regulation designed to influence behaviours. 33 Command and control regulation
involves the imposition of rules and standards backed up by criminal sanctions.
Some of the advantages of this type of regulation include clear definitions of
unacceptable behaviour, establishing performance standards supported by law and
appearing politically decisive. Some disadvantages are that regulation can be
complex and legalistic, defining acceptable standards can be difficult and the close
relationship between the regulator and businesses can lead to what is known as
regulatory capture. Regulatory capture occurs when the regulator begins to protect
the interests of the industry itself, rather than protecting the public interest. In
practice, the command and control model, at the extreme, involves government
ownership of the entire industry.
At Federation, government ownership of the post, telegraph and telephone
industries specifically excluded businesses from operating in these industries.
Further, railways were owned by the state governments, and competition in freight
services was restricted until a 1954 Privy Council decision ended the protection
oftheindustry,pavingthewayforanincreaseincompetitionfromothermeans
of freight transport. It was not until the 1990s that telecommunications, electricity,
gas and water services in Australia were subjected to competition. For much of the
20th century, it was believed that these industries were natural monopolies, where
the economies of scale available to one entity operating in an industry provided
the greatest efficiency, in that the cost of adding another subscriber or connection
to the existing network was infinitesimal. Having more than one operator in such
natural monopolies, it was assumed, would involve unnecessary investment and
costs and therefore make the delivery of services inefficient. A step down from
government ownership is a regulated monopoly. In this instance, the government
establishes the rules for operating the privately owned monopoly and regulates the
prices that the firm may charge (whether through price capping or limitations on
the rate of return on investment). However, for the most part, natural monopoly
theory has been made irrelevant by improvements in technology, particularly
billing systems, and most utilities today are delivered via a competitive market.
In the telecommunications industry, for example, the regulatory framework
uses a variety of different approaches to achieve the desired policy outcomes.
For instance, the Department of Communications and the Arts (a government
department) provides policy advice to the minister for communications for the
telecommunications industry. Through legislation, the parliament establishes
33 Hepburn 2006.
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