Commission deflates Telstra's USO balloon

Telstra's claim of a $1.8 billion net universal service obligation (USO) cost for 1997-98 should be closer to $600 million.

So says a preliminary analysis from the Australian Communications Authority (ACA).

The ACA has released two independent reports it had commissioned as part of its assessment of Telstra's 1997-98 figure.

According to officials, the reports contain recommendations about input values that the ACA should use to assess Telstra's claim, which amounted to $1.8 billion compared with $251.6 million for 1996-97.

The USO is the requirement that telephone services meet an adequate standard anywhere in Australia. Telstra is currently responsible for delivering the USO, but the costs are shared amongst all carriers depending on market share.

Dr Roslyn Kelleher, executive manager for the ACA's consumer affairs group, said: "The adoption of the input values recommended in both reports would result in a significant reduction -- compared with Telstra's claim -- in the overall net universal service cost (NUSC)."

Kellleher added that, combined with recommendations contained in the draft report, The "Year 1" Cost Problem released earlier this year, the NUSC could be further reduced to around $425 million.

Kelleher said, however, the ACA must still decide whether to accept the recommendations suggested in the reports.

The figure will be around these estimates "basically if we go with these [recommendations] and nothing else changes", Kelleher said.

A final figure for the cost will also depend on an outcome on the decision to legislate to cap USO costs, she said. [See Network World Today, 26 March, 1999, "Govt blocks USO costs".]If the legislation is passed, the 1997-98 USO cost will be capped at around $253 million, regardless of the ACA figure, she said. USO provider Telstra and competing carriers will share costs amounting to $253 million.

Kelleher said she expects a decision on the legislation to be made before the ACA completes its final assessment, scheduled for June.

The two reports are:

- ACA USO Forward Looking Technologies Study Final Position Paper, prepared by Gibson Quai & Associates and Ovum; and - Telstra's Weighted Average Cost of Capital: Application to the USO, prepared by The Allen Consulting Group.

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