11 October 2019
Mr Timothy Nothdurft
Sent via email:
xxxxxxxxxxxxxxxxxxxxxxxxx@xxxxxxxxxxx.xxx.xx
Our Ref: 1920/27.02
Dear Mr Nothdurft
nbn FOI application
I am writing in relation to your request under the
Freedom of Information Act 1982 (Cth) (
FOI Act).
My FOI decision is found at
Attachment A.
An FOI decision may be reviewed, subject to sections 53A and 54 of the FOI Act. Please refer to the Office of the
Australian Information Commissioner’s website at the following
link, which provides details about your rights of
review and other avenues of redress under the FOI Act.
If you have any questions or need to discuss your FOI application, please contact the writer via email on
xxxxxxxxxxx@xxxxx.xxx.xx.
David J Mesman
General Counsel
FOI, Privacy & Knowledge Management
ATTACHMENT A
FREEDOM OF INFORMATION ACCESS DECISION
STATEMENT OF REASONS (FOI1920/27)
Background Information
1. In making this decision, I took into account relevant parts of the
Freedom of Information Act 1982 (Cth)
(
FOI
Act) and related legislation, the Office of the Australian Information Commissioner’s (
OAIC) FOI Guidelines,
relevant case law and other applicable sources.
2.
nbn is treated differently from other agencies and Commonwealth entities that are subject to the FOI Act. Per
section 7(3A) and
Part II of Schedule 2 of the FOI Act, documents relating to
nbn’s commercial activities are
carved-out from the application of the FOI Act.
3.
nbn has summarised the OAIC’s and the Administrative Appeals Tribunal’s decisions concerning
nbn’s
commercial activities carve-out (
CAC) in a Background Document (
CAC Background Document) found at the
follo
wing link.
4. In practical terms, the CAC ensures that
nbn is not exposed to disadvantage in the marketplace and similar
commercial environments. The CAC also enables
nbn to function as any other commercial player in Australia’s
highly competitive telecommunications and infrastructure build industries. If
nbn were required to release
commercially-related information under the FOI regime, this would undermine
nbn’s ability to negotiate
competitive contracts, develop and protect its valuable intellectual property, create innovative products and
services and grow market share, among other adverse effects. Disclosure of commercially-related information
would also undermine
nbn’s capacity to generate revenues, while driving up rollout costs. Ultimately,
Australian taxpayers would have to bear those cost increases and other potentially adverse consequences.
Terms of Request & Chronology
5. On 18 September 2019,
nbn’s FOI Team received an email from Mr Timothy Nothdurft (
Applicant) via the
“Right to Know” website. In that email the Applicant sought “
…nbn Product Construct Paper, RMID0844 New
AVC. Higher Speed Tiers, September 2019.”
6. On 24 September 2019,
nbn’s FOI Team acknowledged the Applicant’s FOI request by email, as required by
section 15 of the FOI Act.
7. On 11 October 2019, I completed this FOI access decision and emailed it to the Applicant.
Access Decision – Summary
8. The Applicant seeks the
nbn document titled “
nbn Product Construct Paper “
RMID0844 New AVC. Higher Speed
Tiers” (
Construct Paper). The Paper relates to
nbn’s commercial activities and is not required to be released
pursuant to
section 7(3A) and
Part II of Schedule 2 of the FOI Act.
9. Given my findings in relation to the Construct Paper, it is unnecessary to consider alternative exemption
grounds under the FOI Act. However, I consider that there are other exemptions potentially available to
nbn
under the FOI Act
concerning the Construct Paper. Among other grounds, these include the following sections
of the FOI Act, being 47 (commercially valuable information), 47C (deliberative matters) and 47E (operations of
agencies). My more detailed statement of reasons are set out below.
Access Decision – Findings of Fact and Reasons
10. I have carefully reviewed the Construct Paper, as well as other relevant documents and materials, including
those referred to below. I make the following findings of fact in relation to the Construct Paper:
a. The purpose of the Construct Paper is to enable
nbn to consult with and obtain feedback from
nbn’s
Product Development Forum (
PD Forum) participants on proposed product and pricing constructs for
nbn’s Access Virtual Circuit (
AVC) higher speed tiers.
b. In addition, the Construct Paper is an interim document that is subject to change. It is a core element
in an iterative process, through which
nbn engages with select industry participants and its Retail
Service Provider (
RSP) customers regarding proposed products and product specifications.
c. The Construct Paper is provided to PD Forum participants under a confidentiality regime. Clause 4 of
the PD Forum Terms outlines the confidentiality obligations owed by the PD Forum participants, which
is found at
the following link. The key (confidentiality) provisions are outlined at 4.2(a), (b) and (c).
d. Furthermore, the Construct Paper is clearly marked “commercial-in-confidence” and includes
commercial-in-confidence information, such as
nbn’s:
i. proposed service offerings, speed tiers, product ideas and product specifications;
ii. reasons for developing product ideas;
iii. pricing constructs; and
iv. research findings concerning end-users.
e. The Construct Paper includes a disclaimer that reiterates the confidential nature of the document and
expressly states that: “The recipient must not use this document other than with the consent of
nbn.”
f. The Construct Paper reflects
nbn’s internal commercial ideas, assessments and considerations in
relation to new AVC higher speed tiers.
g. The Construct Paper is
nbn’s intellectual property, upon which
nbn expended time and resources in
developing. In this regard, I note that the Construct Paper includes a copyright notice that the
document is “not for general distribution”.
h. The Construct Paper forms part of
nbn’s asset base.
Commercial activities carve-out
11. As noted above and p
er section 7(3A) and
Part II of Schedule 2 of the FOI Act,
nbn is exempt from the
operation of the FOI Act “in relation to documents in respect of its commercial activities.” This includes
nbn’s
current and future commercial activities. There are various factors which may weigh in favour of an activity
being considered as “relating to
nbn’s commercial activities”. Among other factors, activities may be
considered “commercial” for the purposes of the CAC if those activities:
a. have a commercial goal or purpose; and/or
b. are engaged in or used for commerce; and/or
c. are related to a profit-making motive, generating income or revenue, among other matters.
12. Referring again to the CAC Background Document found at the follo
wing link, the FOI case law has reinforced
that
nbn’s FOI decision-makers must consider “the whole of the circumstances” when determining what
constitutes
nbn’s “commercial activities.” In that context, I note the following points:
a.
Commercial purpose – It is my view that the Construct Paper came into being for a clear commercial
purpose. In particular, the Construct Paper enables
nbn to consult with PD Forum participants and
obtain feedback about
nbn’s proposed product and pricing constructs concerning new AVC speed
tiers. A core function of a commercial enterprise (particularly one operating within the competitive
telecommunications market) is to develop new product and service constructs, ideas and concepts, as
well as establishing appropriate pricing for those proposed products and services.
b.
Role in revenue generation –
nbn’s product and service offerings, such as those proposed products
found in the Construct Paper, generate revenue streams for
nbn. The goal of generating profits,
income or revenue is considered a key element in making a determination that a document relates to
nbn’s commercial activities.
c.
Choice not to publish due to commercial sensitivities –
nbn made a conscious choice to publish
RMID0821 Pricing Review Consultation Paper 2 (
CP2) as part of the company’s pricing review process
for higher AVC speed tiers. While there is a reference to the Construct Paper in CP2,
nbn has not
elected to publish the Construct Paper. It is my understanding that
nbn chose not to publish the
Construct Paper because of the commercially sensitive information contained in that document and
other potentially adverse commercial impacts, as outlined below.
The commercial sensitivity of the Construct Paper is underscored by the clear difference in the level
of detail and the contents found in the Construct Paper as compared to CP2. Noting my overall finding
that the Construct Paper relates to
nbn’s commercial activities, I cannot provide a detailed
comparison between those documents. Ventilation of those details in this Statement of Reasons
would make those reasons an exempt document under the FOI Act. However, I can provide general
comparison points between the two documents. In particular, the Construct Paper contains more
detailed and specific information about proposed speed tiers than CP2. Further, the Construct Paper
contains information about proposed product ideas, as well as detailed information about proposed
product specifications, which are not included in CP2. Noting the technical nature of the Construct
Paper, it is clear that the Paper was drafted for a limited audience of (generally) sophisticated
commercial entities and, in the main,
nbn’s RSPs. These factors further suggest that the Construct
Paper contains commercially sensitive information and relates to
nbn’s commercial activities.
d.
Proposed products so as to “test the market” – Per the findings of fact, the products and pricing
outlined in the Construct Paper are proposed. By definition, they have not been finalised, nor fully
tested with
nbn’s wholesale RSP customers. It follows that the details of those products and pricing
constructs are not yet ready (and may never be ready) to be publicly released in their current form. In
the Construct Paper,
nbn details wholesale product ideas or concepts, upon which the company is
consulting or “testing” with its wholesale, RSP clients before it makes a decision to build and
ultimately launch such products or services. In those efforts to “test the market”,
nbn may seek to:
refine the scope of the prototype product and pricing variables;
determine to progress or “go to market”,
Not progress or decide “not to go to market” with a given product or products, and
evaluate legal or other risks, among other commercial objectives.
Beyond the expense, resources and planning that went into developing those product concepts and
pricing ideas outlined in the Construct Paper, the above factors have a clear and strategic commercial
value to
nbn. They effectively provide a “roadmap” of how
nbn develops new products, which would
have commercial value to competitors and other commercial players in the telecommunications,
infrastructure build and related industries. It follows that
nbn would be unwilling to disclose this type
of strategic information, and particularly not before the company has received feedback or chosen to
move from concept to final product phase. It is my view that most, if not all, companies would have
similar concerns about the disclosure of strategic planning documents surrounding the development
of their proposed products or services.
e.
Potential exposure to claims of misleading end-users and brand impact – Disclosure of the Construct
Paper could also expose the company to various risks, including potentially misleading end-users or
the retail consumer market about
nbn’s products’ specifications and their potential or performance.
This is because
nbn supplies a Wholesale Layer 2 (
WL2) product. The information in the Construct
Paper is of a technical nature and concerns the WL2 service and not the service that an end user may
ultimately receive. It follows that disclosure could drive consumer expectations regarding untested
products, which
nbn may never provide or may provide in a different form or with different pricing
structures. This could expose
nbn’s brand to adverse or negative consequences. It is for those and
similar reasons that
nbn only shared the Construct Paper with (generally) sophisticated business
entities and industry participants – and under a confidentiality regime.
f.
Commercial and confidential markings – The Construct Paper is also labelled “commercial-in-
confidence”. This reinforces
nbn’s clear intention to keep the information contained within the
Construct Paper confidential and underscores the commercially sensitive nature of that document.
g.
Valuable intellectual property – The Construct Paper constitutes
nbn’s intellectual property and has
an inherent commercial value for the company. In particular,
nbn has expended time, resources and
person-hours in developing the Construct Paper and similar documents. Beyond its investment in
developing the Construct Paper, that Paper and documents like it serve an important operational
function in that they are used by
nbn’s business partners to improve and assist in helping
nbn refine
and determine what (if any) new products and services the company should develop. They also serve
as a reference point for
nbn’s staff and business partners in that iterative process. Disclosure of the
Construct Paper would diminish
nbn’s investment in developing these types of documents. In effect,
nbn would be providing competitors (or others in related industries) with a valuable resource, for
which they have not paid.
13. If
nbn were required to release the Construct Paper, it could have a significant impact on
nbn’s future
commercial activities and business endeavours. In that regard, I further note:
a.
Inhibiting nbn’s ability to develop innovative product and pricing constructs – In addition to providing
insights into the ways that
nbn conducts its current business and commercial activities, the Construct
Paper also details the way by which
nbn considers and assesses its future or potential products and
services. It follows that
nbn may be limited in its ability to explore alternative products, technologies,
pricing and business models if the company were required to disclose nascent product ideas and pricing
constructs. This could inhibit
nbn’s ability to develop cutting edge products, services and
technologically advanced solutions because disclosure could signal to the market
nbn’s strategic
objectives. This could also cause
nbn to limit the amount of detailed information shared with RSPs and
PD Forum participants, thereby delaying the speed at which
nbn brings products and services to market
as well as potentially limiting the breadth of services, products and pricing constructs. In effect,
disclosure under the FOI regime could create a disincentive for
nbn to invest in developing new
products and services and limit
nbn’s ability to create innovative pricing models. This could have
adverse impacts upon
nbn’s ability to grow market share and increase its revenues. It is for that and
related reasons that
nbn required PD Forum participants to enter into a confidentiality regime before
sharing the Construct Paper with them.
b.
Potentially anti-competitive effects – The disclosure of the Construct Paper could have a potential anti-
competitive effect. In this regard, it is important to note that the Construct Paper contains information
that could inform the market and
nbn’s competitors about
nbn’s potential future price actions and
product and service offerings. The ventilation of such information could place
nbn at a significant
commercial disadvantage compared with other providers in the highly competitive
telecommunications industry.
c.
Impact on nbn’s IP base and future privatisation efforts – Disclosure of the Construct Paper could also
establish a precedent, whereby commercial entities and others may start to treat
nbn’s valuable
intellectual property and confidential information as part of the “public domain”. Once a document
enters the public domain, it undermines its commercial value. This is an important issue for
nbn,
particularly in light of any future privatisation efforts involving
nbn. In any privatisation, intellectual
property is a key asset, which will figure in the calculation of any future sale price. It follows that if
documents, like the Construct Paper, become part of the “public domain” pursuant to FOI requests,
nbn could potentially undermine the value of its asset base. For those reasons, there is a clear
commercial value to
nbn in the Construct Paper, both in the present and future.
14. Based on the above factors, it is my view that the CAC applies to the Construct Paper. Per
sections 7(3A)(a)
and (b) of the FOI Act, the Construct Paper is not subject to the FOI Act.
15. As
nbn has relied on the CAC, it is unnecessary to consider alternative exemption grounds under the FOI Act.
However, for completeness, I note that there are other exemptions potentially available to
nbn under the FOI
Act
concerning the Construct Paper. This includes exemptions under section 47 (commercially valuable
information) and section 47E (operations of agencies), among other grounds. In addition, I refer to section 47C
of the FOI Act (deliberative materials). In my opinion, the Construct Paper would clearly fall within the meaning
of the meaning of section 47C. For the reasons outlined above, it is equally clear that the public interest would
not favour disclosure of the Construct Paper.
16. For this FOI application,
nbn was able to quickly search and retrieve the Construct Document. As this process
took very little time, I have determined that no charges are payable with respect to this task. In relation to
drafting this decision,
nbn’s FOI Team spent approximately 10.5 hours reviewing and considering the relevant
documents, making enquiries of relevant
nbn personnel and drafting this decision (equivalent to $110, noting
that no fees are payable for the first five hours). Therefore, the total processing fees equate to $110.
17. In
its Submission to the OAIC Charges Review, nbn outlined its support of fees and charges and their
importance to the FOI scheme. Normally,
nbn would charge applicants for processing fees incurred in relation
to FOI requests. However, I also considered
nbn’s commitment to the objects of the FOI Act and, in particular,
section 3(4) of the FOI Act, which seeks to facilitate and promote public access to information, promptly and
at the lowest reasonable cost.
18. On balance, I have determined to waive the processing fees in relation to this FOI application. This is
permitted by Regulation 8 of the
Freedom of Information (Charges) Regulations 2019, which provides
decision-makers with a general discretion to impose or not impose a charge. In making this determination I
took into the account the fact that the Applicant made the FOI request in a personal capacity. I also took into
account the fact that
nbn made a determination not to release the Construct Paper.
19. If you are dissatisfied with this decision, you have certain rights of review and other avenues of redress.
These are outlined in the covering letter, provided with this Statement of Reasons.
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