By the numbers: Has the USO passed its sell-by date?

Summary:The Universal Services Obligation was all about ensuring that everyone had a phone service. Now that NBN Co is charged with that responsibility, do we really need a USO?

Last week, ACMA tabled its 2011-12 Communications Report to parliament. Besides all the feel-good stuff about how much more we're using the internet and smartphones, there was a section looking at the Universal Service Obligation (USO). Increasingly, the USO is looking like a relic of a bygone era.

The USO came into being in 1999, when the internet was still in its infancy and mobile phones had only just been reduced to the size of something you could pick up without a forklift. Nobody could have foreseen where the world would be taking us, so the focus was on ensuring equal access to standard telephone services (whatever that is these days) and payphones. Yes, remember them?

Telstra was (and still is) what was called the universal service provider — the phone service provider of last resort. It gets paid for ensuring that the USO is maintained. According to the ACMA figures, they were given AU$145 million last year for doing the job, paid for by all telecommunications carriers that make more than AU$25 million. Last year saw the cost divvied up amongst 43 carriers. Telstra ended up paying 60 percent of the total, three times more than Optus (with about a third of Telstra's total revenue).

USO
(Credit: Phil Dobbie/ZDNet)

Key to the USO is the installation and maintenance of fixed line services, demand for which is very much on the slide — down 2 percent last year. Still, there has to be a line available if you want one. And they must be fixed if they break. Telstra was called out on more than a million fault repairs during the last year (2011-2012).

The USO changes, though, when the National Broadband Network (NBN) comes to town. When that happens, just who will be responsible for ensuring that there is nationwide access to standard telephone services? NBN Co will make sure that everyone has the ability to connect, but it's up to service providers to ensure that it happens. It'll be up to the newly founded Telecommunications Universal Service Management Agency (TUSMA) to determine who gets what from the USO kitty.

But do we need any USO funding? Certainly not if the reason is to ensure access to a standard phone service. If NBN Co is connecting up all of Australia, then surely there will always be a multiple of retail providers willing to offer services in any geographic area. If not, and a localised Telstra monopoly remains, then NBN has failed in one of its prime objectives. If nobody is willing to service an area, we don't need to put a levy on other providers to see Telstra do the job, we need to look at the NBN CO pricing model.

TUSMA's other responsibility is ensuring that "payphones are reasonably accessible to all Australians." For me, the nearest payphone is a two kilometre walk, but fortunately, my mobile is normally in my back pocket. Payphones are a relic of a bygone era. Remember the queues? Or those people who could tap the hook switch to make a call without paying? They're much less essential these days, which is why the number has dropped from 45,114 in June 2008 to 31,032 in June this year. At some point it'll be cheaper to give mobile phones to people who don't have them, rather than maintain a payphone network.

The continued availability of untimed local calls is another aspect of TUSMA's work. Yes, seriously. Presumably, a subsidy will be available for each provider who can make such a guarantee. Is this something we should really be focusing resources on? Is the untimed local call really an objective we need to maintain? If it's an issue of ensuring that the poor or elderly need help to cover their phone costs, look at a subsidy for the entire bill. Otherwise, with the promise of competitive retail services, won't we see a myriad of voice pricing models come forward in the NBN era? Imagine how distorted the market will be if a levy is charged to everyone, then passed back to those who offer flat local fees.

Sadly, TUSMA's remit is tied up in legislation that's already been passed. It's a sign of how little the legislators understand about the changing shape of telecommunications. We don't need a swag of money to ensure that Telstra covers the country because NBN Co will do that job. That guarantee has already been made. Except for the provision of emergency and disabled services, is there really a need for any more money to change hands?

Topics: Telcos, Australia, Networking

About

Phil Dobbie has a wealth of radio and business experience. He started his career in commercial radio in the UK and, since coming to Australia in 1991, has held senior marketing and management roles with Telstra, OzEmail, the British Tourist Authority and other telecommunications, media, travel and advertising businesses.

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