Could USO changes be poisoning the well?

Could USO changes be poisoning the well?

Summary: There must be something in the water in Canberra. After years of measured inaction, the Coalition is taking long-overdue steps towards universal broadband and working around Telstra's continued domination -- after 10 years of deregulation -- of the country's telecommunications wholesale markets.

TOPICS: Broadband, NBN

There must be something in the water in Canberra. After years of measured inaction, the Coalition is taking long-overdue steps towards universal broadband and working around Telstra's continued domination -- after 10 years of deregulation -- of the country's telecommunications wholesale markets.

The government will never be able to escape criticism that it's just acting now to buy votes. Nonetheless, Communications Minister Helen Coonan faces an even bigger potential problem if her latest gamble turns sour. This folly is a review of the Universal Service Obligation (USO), that legislatively enforced standard that requires Telstra provide all Australians with telecommunications at least as good as using a carrier pigeon.

Supported by an industry fund established with the initial sale of Telstra and intended to ensure services for Australians in commercially difficult areas, the USO mandates access to a serviceable telephony line, pay phones where deemed necessary, and a basic data service of at least 64Kbps (mandated under the Digital Data Service Obligation, or DDSO).

Given the increasing expectation of multi-megabit speeds, the long-standing DDSO seems positively outdated; judge this by the generally negative reaction to Telstra's saccharine vow to offer a minimum 512Kbps wholesale service at AU$59 for the next 14 years.

If I may inject a bit of perspective: in the UK, where a USO ensures BT and Kingston Communications subsidise phone services for low income earners, the minimum required data service is 28.8Kbps; this was upheld in a review last year.

So, by world standards, our USO of 64Kbps isn't necessarily horrible -- although I would venture that many residents find it hard to get 64Kbps connections when their phone lines have been rendered useless by heavy rains and Telstra's refusal to upgrade its network in many areas.

By announcing a minimum 12Mbps WiMAX wireless service for 100 percent of Australians, Senator Coonan has effectively increased the DDSO significantly. If this program can guarantee all Australians access to such a service -- as the government has promised it would -- even rural customers will be well serviced indeed.

The problem is this: Senator Coonan also announced she would be axing the DDSO, arguing that the subsidies provided under the USO are no longer relevant. "This obligation", she said in the 27 June National Press Club speech where she announced the review, "has been superseded by the Australian Broadband Guarantee -- a guarantee that every Australian can access a much faster broadband service via a government subsidy of up to AU$2,750."

That guarantee, however, is built on a premise of commercially sustainable competition rather than government regulation. That means that Senator Coonan has effectively removed any imperative for Australia's telecommunications carriers to provide any data service, at all; what is provided will be delivered under the assumption that the government's AU$2,750 subsidies will attract enough interest to deliver Australia Connected's target of 100 percent coverage.

If that coverage proves less than achievable, rural Australians will no longer have recourse to the DDSO -- or to any legislation at all.

There's one more problem with this: that 100 percent coverage guarantee is predicated on the use of wireless local loops. WiMAX, the obvious and stated way of delivering these, is great for OPEL but remains shunned by Telstra, which needs to be involved in this game to deliver the best outcome for all Australia. Telstra continues to insist that universal broadband must be fibre-based, but refuses to pay for that fibre.

Senator Coonan is taking a big chance here. There is a major difference between a mandated data minimum standard, and a subsidy-driven free-market approach to providing universal broadband. The DDSO, at least, required Telstra to find a way to provide some sort of data service to all Australians. By eliminating it and putting complete reliance on government subsidies to private operators, the government is putting its entire faith in the belief that it has finally, with Australia Connected, figured out the magic formula.

The commercial market is subject to commercial realities, after all, even with government subsidies. Fingers crossed that axing the DDSO -- and putting the fate of universal data services in the hands of that commercial market -- will deliver the stated objectives.

If not, Senator Coonan's leap of faith -- in a commercial market that has proven less than insatiable when it comes to new infrastructure build-outs -- could leave behind a poisoned legacy that would take the next government years to disinfect. And for many Australians, even a village pay phone could eventually seem like a luxury.

Topics: Broadband, NBN


Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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  • A little over the top

    This article is a little over the top, considering Dial up runs at 56kbps and the USO itself mandates a telephone service.

    So when you consider those two points, the DDSO is very redundant.

    Also, you consider the OPEL spending, it further makes much, much more sense to drop the obligation, and certainly allow industry to prosper and fund these services (some with subsidy).

    So keeping that in mind, i doubt we'll see 500 Satelitte launches into space, however, I do not doubt the outcomes from the USO review will be positive for everyone.
  • USO is old news

    The USO is technically past its used by date. Almost the only reason left to have a home phone is for ADSL. If you can get wireless or cable broadband, why would you keep the land line?

    Country areas that currently have no ADSL or wireless can get satellite broadband right now with the government subsidy. Next G almost already covers the whole population and will offer very fast speeds soon. Opel has pretty significant plans and government subsidies to match that. If you have at least 2 operators in broadband competition across almost the entire population; what use is the USO?
  • ok...

    Spoken like a true city dweller Anonymous...
  • Main concern is Telstra

    I am also a city dweller, but as I see if the problem with dropping the DDSO is that it's the only thing forcing Telstra to keep providing any kind of data service to many rural areas. Claims that modems run at 56Kbps are great but I would welcome input from truly rural residents who are getting anywhere near that kind of speed -- which, by the way, is utterly useless for today's Internet. Sure, mobiles have picked up much of the slack -- but is everone in rural areas really that far weaned off their landlines? (I would honestly be interested to know if this was the case). And are those the same phone lines that anecdotally fail with some regularity, even in times of bad weather?

    And while Opel will certainly be getting better bandwidth to many areas Any Day Now, in the meantime it seems like dropping the DDSO will eliminate any reason at all for Telstra to pretend it cares about providing data services to rural areas. Saying there are two operators in broadband competition across almost the entire population seems a little optimistic (for now at least) -- and while private enterprise may eventually fill in the gaps, dropping the DDSO now seems to be a concession to Telstra that they don't even have to keep pretences up anymore.

    Or perhaps I am in fact just overstating the risk this seems to pose. Look forward to reading more opinions.
  • Many not covered by the DDSO

    Actually you are not covered by the DDSO unless your residence;

    Is within 4Km of an ISDN enabled exchange (6Km in country areas)

    Not on any PGS/conditioning equipment (Pair-gain, RIM, Loading coils ect)

    Otherwise you can only get a discount on your satellite install under the SDDS.

    I had my home, less than 10Km from Perth CBD, checked and could only use the SDDS as I am over 4Km from the exchange (4.4Km).

    If you are not willing / unable to afford ISDN or satellite then you are only entitled to a minimum of 19.2Kb/s.
  • Is this guy for real?

    I doubt if this guy has ever been west of Parramatta but Optus or any other carrier other than Telstra has never provided any service in the bush. To compare us to other countries who don't have 20M people spread over 3 M square miles is bit stupid. WiMax is crap compared to Next G which just won a world carrier competition. Next G already covers 98% of the pop and will go faster than Wimax. Its dumb to pay $1B of public money to duplicate it. Fibre is the only way to go otherwise the mobile network is going to faster than the fixed! Telstra was going to build it for free.
    Did the Telstra shareholders who bought off the government know that the government was then going to shaft their sharevalue by donating to a foreign competitor? How dare the government invest the future fund in a risky venture like Opel. They may build it out of fencing wire.