Australia's universal telco service obligation's day is done

Productivity Commission wonders just what Telstra is doing with the AU$3bn it's being paid to put phones everywhere

Australia's Productivity Commission (PC) has suggested the nation can probably scrap the telecommunications universal service obligation (TUSO) that requires every Australian be provided with a telephone connection.

The base reason for the suggestion, contained in a draft report (PDF), is that the TUSO was designed for a time when a basic voice services mattered and suppliers were scarce. But now Australia's National Broadband Network (NBN) is on its way to providing a data service to all Australians, who can also acquire a plethora of other comms services.

The report notes that folks in rural areas remain under-serviced and that even the NBN's satellite services won't satisfy many. But it recommends “small and concentrated, and amenable to specific social programs rather than large scale government interventions” as the remedy, rather than another universal program.

One reason for targeted action is that the PC can't find evidence that Australia's dominant carrier, Telstra, has done a good job with the AU$3bn it will pocket under the TUSO contract it won and which runs until the year 2032.

“The basis for funding is unclear and disputed,” the draft report says. “Telstra is not required to report on the number of non-commercial services or on the costs of any telephone service it supplies. Effectively every fixed-line customer of Telstra is treated as a TUSO customer, irrespective of whether the service is commercial or not.”

The draft also wonders whether Telstra uses the TUSO to fund other services. The carrier says it provides some pay phones under the TUSO, but the draft notes that Telstra doesn't have to say which pay phones are subsidised and which are not. Given that Telstra now uses pay phones as WiFi base stations for its Telstra Air product, the Commission offers the following opinion:

“In an age where basic phones and payphones are rapidly becoming outdated, the lack of transparency and accountability makes the continuation of current arrangements difficult to justify from the point of view of those who contribute to its funding. It also makes any assessment of the value of the TUSO to the broader community challenging. These issues are compounded by the exceptionally long-term nature of the contract — a feature that sits oddly against the highly dynamic nature of the sector.”

The draft's preferred re-casting of the TUSO is for it to emerge as “a baseline broadband service to all premises in Australia, having regard to its accessibility and affordability” [Those are the PC's italics].

There's plenty more, and plenty more detail, but the thrust of the draft is simple: current arrangements are already anachronistic and there's a truckload of money already allocated to keep on doing stuff that's no longer needed, for another 16 years.

The PC therefore suggests Australia's government put its review of the consumer safeguards in the telecommunications industry at the top of its to-do list.

Australia's government is looking for costs it can cut, so perhaps it will heed the PC's call. But of course there's now consultation and a final report to go before the wheels of government start to turn. That Australia's governing bloc is a coalition of the right-of-centre Liberal Party and agrarian socialist National Party also means any moves to reduce subsidies for rural services will meet stern opposition in the government party room. ®

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