USO to be axed in 2020 for Universal Service Guarantee

Upon the completion of the NBN rollout in 2020, the USO will be replaced with a guarantee ensuring broadband and voice services are supplied to every premises in Australia.
Written by Corinne Reichert, Contributor

The Australian government has announced that it will remove the Universal Service Obligation (USO) and replace it with a Universal Service Guarantee (USG) in 2020.

The USG will mandate access to voice and broadband communications services, with the latter to continue being provided through the current USO contract with Telstra until the National Broadband Network (NBN) rollout is complete.

Before the USG replaces the USO, Communications Minister Mitch Fifield said it must meet four requirements: The completion of the NBN in 2020, which will provide broadband to 100 percent of the population; voice services being available at 100 percent of premises if requested; new universal service delivery arrangements being more cost effective than the current USO contract with Telstra; and new consumer safeguards being developed and implemented after public consultation.

"The government is taking a 'belt and braces' approach to protecting telecommunications accessibility for people in regional Australia," Fifield said.

"The government is putting new, stronger safeguards in place before making any changes to existing safeguards while the NBN is rolled out."

The USG will be underpinned by the Statutory Infrastructure Provider (SIP) framework currently facing Parliament, with the government to come up with options to provide voice services to the most remote premises in the nation that are connected by NBN's satellite and do not have mobile coverage.

The government is now looking into cost and delivery options for the USG, saying it will "consider the future allocation of the AU$100 million in annual funding it currently pays into the existing USO contract as part of any change to existing USO arrangements".

The Productivity Commission's final report into the USO in June called it "anachronistic and costly", and recommended the government wind it up by 2020 given 99 percent of the population has access to mobile broadband, and 100 percent will be covered by the NBN.

The government published its response [PDF] to the Productivity Commission's inquiry on Wednesday, a year after the Productivity Commission's draft report, which itself followed an issues paper in mid-2016.

The government's response agreed with the commission's findings and added that more than 96 percent of Australians have access to three commercial mobile networks.

"In developing options for implementing a future Universal Service Guarantee, the government will examine the feasibility and cost implications of issues including: Alternative means of providing voice services to premises in NBN Co's satellite footprint, recognising that NBN Co's satellites are designed for broadband not voice services; the potential impact on NBN Co's costs and network design as premises currently served by Telstra under the USO migrate to NBN infrastructure; [and] where and when it may be appropriate for Telstra to reduce the number of existing payphones provided under the USO," the government added in its response.

The government did not address the commission's suggestion that an independent evaluation of the mobile blackspots program be commissioned prior to the third funding round, with the government having last month announced the locations for this round.

It also did not mention delaying the Regional Telecommunications Review from 2018 until 2020, as suggested by the commission, or whether it would consult with state and territory governments on a "stocktake" of all telco programs to improve cost efficiency or collaborate on an audit of all existing telco infrastructure such as fibre networks in order to use and expand these.

The 20-year USO contract -- which mandates Telstra as the fixed-line phone service provider of last resort, giving the telco hundreds of millions of dollars each year for the installation and maintenance of fixed-line services -- ended up facing government reform thanks to the Regional Telecommunications Independent Review.

Signed by the Labor government back in 2012, the USO currently costs the government around AU$100 million per year, with AU$200 million funded via a levy on telcos.

In total, the Productivity Commission estimated that the government is spending AU$1 billion annually on universal telecommunications, not including the NBN: AU$611 million on telephone allowance; AU$253 million on the standard telephone service USO; AU$48 million on the mobile blackspots program; AU$44 million on the payphone USO; AU$29 million on programs to support digital inclusion; AU$22 million on the emergency call service; AU$22 million on the national relay service; AU$17 million on voice-only customer migration; and AU$5 million on remote Indigenous telecommunications programs.

The commission also "tentatively" estimated that the USO involves an annual subsidy of standard telephone services of between AU$250 and AU$2,800 per standard telephone USO service, and between AU$2,600 and AU$50,000 per payphone USO service.

Vodafone, which has been calling for an end to the USO for years, welcomed the government's announcement on Wednesday, but said money would be wasted between now and the NBN being completed.

"We congratulate the federal government for finally handing a death sentence to the outdated and anti-competitive USO," Vodafone chief strategy officer Dan Lloyd said.

"We are keen to work with the government on competitive options to provide reliable voice services throughout the NBN satellite footprint. However, every day that the current USO continues is a day that regional Australia misses out. We will be working with government to identify options for action before 2020."

Vodafone claimed that Telstra is continuing to receive around AU$1 million per day, and that half of the copper and payphone services it is meant to be maintaining under the USO have already been shut down by Telstra.

"Based on those figures, that's effectively close to half a billion dollars in taxpayer and industry funding Telstra should be paying back," Lloyd argued.

The Australian Communications Consumer Action Network (ACCAN) also welcomed the USO announcement, saying it will work with government to ensure the USG and service delivery arrangements take into account consumer costs, quality of voice services, reliability of services including outage repair timeframes, and fallback services.

"All consumers need access to reliable and affordable voice and internet services," ACCAN CEO Teresa Corbin said.

"Guarantees underpinning access to vital voice and internet services are fundamentally important for areas where the market is not delivering adequately."

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