Government contends rural NBN subsidy and new USO will fix regional coverage

Subsidising the fixed-wireless and satellite networks with a regional broadband levy and SIP requirement will ensure the NBN and USG initiatives provide broadband access to all Australians, the government has said.
Written by Corinne Reichert, Contributor

The Australian government has argued that its Regional Broadband Scheme (RBS) charge and recently announced replacement system for the Universal Service Obligation (USO) will form an "integrated package" providing both the funding for and access to telecommunications services in regional areas.

The government's statements came in response to a Greens party recommendation that it revisit the RBS with updated costings and consideration of the USO, mobile services, and "the current and emerging state of telecommunications technology and markets".

The Telecommunications (Regional Broadband Scheme) Charge Bill 2017 proposes a AU$7 monthly charge to fixed-line broadband customers to subsidise those connecting to the loss-making National Broadband Network (NBN) satellite and fixed-wireless services.

Also under consideration is the Telecommunications Legislation Amendment (Competition and Consumer) Bill 2017, which would place Statutory Infrastructure Provider (SIP) obligations on NBN to ensure the company has a legislated obligation to connect all Australian premises.

"The government considers that establishing the SIP and RBS regimes, before further progressing USO reform, provides an important, timely, and much-needed safety net, particularly for regional and remote consumers," the government explained in its response [PDF] to the Senate Environment and Communications Legislation Committee's report.

According to the government, its recent decision to replace the USO with a universal service guarantee (USG) underpinned by a SIP framework simply "highlights the importance of ensuring there is a mechanism in place to secure funding of NBN's loss-making networks".

"The proposed SIP obligations will ensure that all people in Australia are able to order a high-speed broadband service regardless of where they live, and that NBN becomes the default SIP as the network is rolled out. The RBS will provide equitable and transparent funding for the loss-making NBN fixed-wireless and satellite networks in regional Australia," it said.

"The SIP obligations and the RBS form an integrated package. One cannot proceed without the other."

According to the government, the RBS is "the most equitable and transparent way to fund broadband services" in regional areas across the nation.

"The RBS will adapt to changes in the telecommunications market over time," the government said, adding that the Australian Competition and Consumer Commission (ACCC) will be reviewing and advising the communications minister on the RBS charge amount every five years.

"The RBS has been purposefully designed to be dynamic, to adapt as the costs of regional broadband crystallise and as the market adjusts."

On applying the RBS charge to mobile services, the government argued that mobile cannot be a substitute for fixed-line broadband connectivity, particularly due to the higher average cost of data.

While rejecting the Greens party's suggestions, the government "welcomes and supports" the majority Senate committee report, which had recommended that the proposed RBS charge Bill be passed, saying it would begin pushing the legislation once House of Representatives debate resumes.

"The amendments will enhance Parliamentary scrutiny of the determinations and align the relevant RBS-related legislative instruments under the TLA Bill and Charge Bill more closely with the usual disallowance procedures," the government said.

The committee had published its report in September, with government at the time noting that the RBS is already built into existing NBN pricing today, and the Bill simply extends the cost to non-NBN competing wholesale broadband networks.

"The committee considers it is critically important to establish a scheme for adequately and transparency funding the much-needed infrastructure for rural and regional Australia that cannot be provided on a commercial basis. Of the various options available for funding these non-commercial services, the proposed RBS most clearly fulfils this objective," the committee said in its report.

The Bill had come under criticism from multiple telcos, with TPG arguing that the proposed levy would be anti-competitive.

"It is clear that the RBS charge will economically damage the small number of carriers that the DOCA [Department of Communications and Arts] has defined as competing with NBN Co in broadband markets," TPG had said.

TPG said the levy should be funded by the government through general taxation or a broad levy imposed across all broadband services including wireless providers, mobile operators, and over-the-top (OTT) services that will benefit from the NBN, such as Microsoft, Google, and Facebook.

The Electrical Trades Union (ETU) similarly said in its submission that NBN is placing economics ahead of consumers, arguing that the government should pay the AU$7 levy.

According to the committee's report, Telstra and Optus additionally argued that the RBS should not apply to enterprise networks, wholesale data services, and services that are only "technically capable" of providing superfast broadband but are not being used to do so.

Telstra claimed that the RBS had "transformed from its original intention as a 'anti-cherry picking measure' into an industry tax", and argued that telcos might not be able to determine the nature of services or the number of premises being supplied at a retail level, and that the government should change the metric to services in operation instead.

The Bill vests the communications minister with the power to change the cost above the current AU$7-a-month amount, with the upper limit capped at AU$10 for the first financial year of its operations "and for future years would be indexed to the consumer price index", the report said.

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