Feds slap down Telstra over regulatory criticism

The Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, said this morning the government's telecommunications consumer safeguards -- including the Universal Service Obligation, provided by Telstra with independently-arbitrated subsidies from other telecommunications carriers -- "will remain regardless of who owns Telstra".

The USO requires the telecommunications industry to ensure all Australians -- regardless of where they live -- to have access to a standard telephone service and payphones.

Senator Coonan's statement followed comments from Telstra regulatory managing director Kate McKenzie yesterday to a Sydney telecommunications conference that funding for Telstra to maintain the USO was not adequate to cover what needed to be done.

McKenzie said the regulatory regime was "starting to crack under pressure".

"Whereas historically we could use our profits from metropolitan areas to cross-subsidise into those rural areas, that gets more and more difficult where there is competition for that market in metro but not in rural areas," McKenzie said.

However, Senator Coonan said the safeguards -- which included the Customer Service Guarantee, the Telecommunications Industry Ombudsman, the Network Reliability Framework and price control arrangements, as well as the USO -- would "continue to deliver telecommunications services to those who need them".

"The government reviewed the USO and the Customer Service Guarantee last year, including the level of subsidies paid by other telecommunications providers to Telstra, to deliver an adequate level of service in rural and regional Australia," said Senator Coonan.

"We reaffirmed our commitment to maintaining the USO safeguards following the review and during the election last year. Put simply we do not intend to change or water down the broad legislative framework governing the USO including the current USO costing and funding arrangements".

The subsidies are set at AU$171 million this year, AU$157 million for 2006/07 and AU$145 million in 2007/2008.

The timing of McKenzie's comments is particularly provocative as the federal Liberals try to secure support from their coalition partner, the rural-based National Party, for the sale of the government-owned majority stake in the carrier.