Home Telecoms & NBN Productivity Commission calls for winding up USO by 2020

Productivity Commission calls for winding up USO by 2020

Productivity Commission calls for winding up USO by 2020 Image courtesy of Stuart Miles at FreeDigitalPhotos.net Featured

The much-criticised telecoms industry Universal Service Obligation (USO) finally looks set for the scrap heap, with the Productivity Commission recommending to the federal government that the programme be wound up by 2020.

The Productivity Commission’s final report, tabled in Federal Parliament on Monday, recommending an end to the USO, has been met with applause from players in the telecommunications industry who have long urged it be scrapped.

Lining up to welcome the outcome of the Productivity Commission’s report were telco Vodafone and the Competitive Carriers Coalition representing a number of small to medium-sized telecoms service providers.

And, the Australian Communications Consumer Action Network (ACCAN), the industry body representing telecoms consumers, gave a qualified tick of approval for the recommendations, noting that the USO is not currently delivering to consumers as it should be – and raising concern that regional consumers, who are reliant on satellite services and do not have adequate mobile coverage, may lose access to voice services.

Under the USO agreement, established in 2011, Telstra receives about $300 million a year, including $100 million from the government and $197 million from rival telcos in the form of an industry levy, to provide landlines and basic telecommunications services to all Australians.

But now the Productivity Commission has said, in the report released on Monday, that the USO is past its use-by-date and that the National Broadband Network and mobile networks will meet the connectivity needs of Australians.

When the Commission released its draft report in December last year, it labelled the long-term USO agreement as "difficult to justify".

It also said that in a digital age the voice-based telecommunications USO was "anachronistic and needs to change" – and was costly and that it lacked transparency and accountability.

Telstra’s competitors have long called for an end to the USO which they see as an unfair impost on the industry, and have repeatedly complained about Telstra continuing to be subsidised to the tune of millions of dollars to provide services, without accounting for the cost, or the number of services it supplies.

In the final report, the Productivity Commission says that with rapid developments in telecommunications technology transforming people’s lives, the growing demand for “ubiquitous digital connectivity” provides a strong case for reform that reflects evolving policy, market and technological realities.

“The sizable public investment in National Broadband Network infrastructure will provide high speed (voice capable) broadband to all premises (on request) across Australia by 2020 – at a quality that is, for the most part, superior to what has been available,” the Commission says.

“Wholesale prices will also be capped nationally and across its different technology platforms. As such, the NBN has been designed to narrow the city–country digital gap with cross subsidies from commercial to non commercial services within a funding envelope.

“Australians are also well served by mobile networks, with over 99% of people having access to mobile telephony (and to a slightly lesser extent, broadband) where they live.

“Leveraging off the NBN and mobile networks means that the objective of universal service can be reframed to provide baseline (or minimum) broadband and voice services to all premises in Australia once the NBN has concluded its rollout phase, having regard to the accessibility and affordability of these services. Increasingly, broadband will be the main medium for voice services.”

According to the Commission, for the vast majority (more than 99%) of premises, the combination of the NBN and mobile networks is likely to meet or exceed minimum standards for universal service delivery, and as such, “the TUSO is no longer needed”.

To top off its reasoning on recommending the scrapping of the TUSO, the Commission says current market trends and policy settings suggest that telecommunications services will continue to be affordable for most people.

“To the extent that there are any remaining availability, accessibility or affordability gaps, current trends and policy settings suggest that these are likely to be small and concentrated. The TUSO can therefore be terminated once the NBN is fully rolled out and replaced by a set of targeted policy responses for:

  •     (up to 90 000) premises in pockets of the NBN satellite footprint without adequate mobile coverage, and
  •     cohorts of users with particular needs.

The Commission says programmes to address these gaps should be flexible, allow for community input and facilitate informed consumer choice – and their costings should be transparent and subject to competitive tendering where feasible.

“The narrow scope and small scale of these programs tip the balance towards funding from general government revenue as opposed to an industry levy.”

While noting that transitioning to this new universal service framework is complex and will take a few years, the Commission says the transition process needs to start immediately.

“The fundamental roadblock posed by the opaque contract with Telstra, and the surrounding legislative architecture, should be addressed promptly and systematically.

“The current pattern of disparate and siloed policy reviews and proposed legislative reform raises concerns about the coherence of policies to address universal service objectives and must be carefully managed and co-ordinated,” the Commission concludes.


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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).


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