On 6 December 2016, the Productivity Commission
(Commission) released a
draft report on its ongoing inquiry into the Telecommunications
Universal Services Obligation (USO) (Draft
Report). The Draft Report seriously questions the utility
and suitability of the USO and the contractual arrangements that
underpin it. It also calls for comprehensive reforms and a
renegotiation of the arrangements with Telstra.
The USO was introduced in 1999, when telecommunications services
were largely delivered to fixed-voice handsets and calls were made
over fixed-line copper connections. It was aimed at ensuring that
all people in Australia had 'reasonable access' to
standard telephone services (STS) and payphones on
an 'equitable' basis, wherever they reside or
carry on business. The Telstra USO Performance
(TUSOP) Agreement (which commenced in 2012)
provides the basis upon which Telstra receives payment for
performing the USO. It also includes the arrangements for the
migration of customers to the nbn"
Nowadays, Australian consumers exhibit a strong desire for
constant mobile connectivity and high value is placed by businesses
and government on digital data. This is reflected in the
significant investment made by the Australian government in the
nbn" network, with the expectation that all
Australian households and businesses will have access to high-speed
broadband by 2020.
THE DRAFT REPORT
The Draft Report identifies the current USO arrangements with
Telstra as outdated and potentially anti-competitive. In
particular, the Commission notes that "as a
non-contestable obligation given to one provider and partly funded
by other providers, [the USO] effectively stymies
competition".1 It also recommends that the USO
be phased out as soon as practicable for reasons including the lack
of transparency and accountability of the current arrangements.
The Draft Report recommends that the Australian government
in consultation with state and territory governments, review
all telecommunications programs that share universal service
objectives to improve their efficacy and cost-effectiveness;
reframe the objective for universal telecommunications services
to provide a baseline broadband (including voice) service to all
premises in Australia once the nbn" network
is rolled out; and
introduce legislation clarifying the role of
nbn as a universal service provider of wholesale
There is a sound basis for the Commission's progressive
recommendations given the rapidly evolving telecommunications
market, the structural separation of Telstra and the successful
roll out of the nbn" network.
It is clear that Government policy is that there should be
widespread access to high-speed broadband services. This is what
the nbn" network is planned to provide
through the capping of wholesale prices across all technology
platforms and locations and nbn's standard
access obligations. As a result, the objective of universal service
could indeed be reframed to provide a minimum broadband
service to Australians once the nbn" network
is fully rolled out.
However, as the Commission correctly identifies, this is not
Firstly, transitioning to a new framework for universal service
is complicated by the current TUSOP Agreement, which will need to
be renegotiated if the Draft Report's recommendations are
Secondly, consideration will need to be given as to whether the
USO should only be removed once the nbn"
network roll out is complete, or whether to commence a staged
wind-back of the USO as areas become connected to the
nbn" network. The Commission has expressly
invited feedback on these matters.
The Commission has called for submissions on the Draft Report by
20 January 2017.
1 Productivity Commission,
'Telecommunications Universal Service Obligation'
(Draft Report Overview, November 2016), 7.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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