Vodafone, CCC call for end to ‘black hole’ of USO

Government should move to scrap the Universal Service Obligation, argue Telstra’s rivals

Vodafone and the Competitive Carriers’ Coalition have repeated their calls for the Telecommunications Universal Service Obligation scheme to be scrapped in the wake of yesterday’s report on the USO by the Productivity Commission.

The PC’s report described the scheme as “anachronistic and costly” and said it should be wound up by 2020. The USO is intended to ensure that every Australian can access a standard landline telephone service and payphones, no matter where they live.

Telstra delivers the USO under a contract with the government that is not due to expire until 2032. Under the 20-year contract Telstra receives $100 million per year from the government as well as funding from an industry levy.

The PC said that in addition to being technologically outdated, the scheme lacked transparency. The commission struggled to pin down the cost of each service delivered under the USO, estimating the per landline service cost at between $250 and $2800.

“Regional Australia deserves better,” said Vodafone’s chief strategy officer, Dan Lloyd. “The calls for USO reform have been growing louder and stronger over recent years, and the need for change is now urgent.”

“Almost $1 million per day is currently going into a black hole,” the Vodafone executive said. “This is a staggering sum of money which could be delivering real benefits for regional Australia.”

Communications minister Senator Mitch Fifield said yesterday that the government had established a task force within the Department of Communications and the Arts to develop a response to the PC’s findings.

“This taskforce must get to work immediately so that the government can soon release detailed plans about how it will transition to a model which delivers the best outcomes for regional Australia, taxpayers and the telecommunications industry,” Lloyd said.

The Competitive Carriers’ Coalition said that the USO and the government’s proposed Regional Broadband Scheme levy, which is intended to help subsidise so-called ‘non-commercial’ NBN services, “are both a form of tax on competitive communications services, raising the cost of people doing business and using basic communications services.”

“It is abundantly clear that the hundreds of millions of dollars in direct subsidy being paid by consumers every year to Telstra under the TUSO cannot be justified,” a spokesperson for the group said.

“The commission has spent months examining the TUSO and yet it cannot do better than estimate the subsidy per USO service is between $250 and $2800 annually.

“Such imprecision would simply not be tolerated in any other welfare program.”

The government should “immediately act to end a scheme,” the spokesperson said.

Labor said it would examine the PC’s final report and consult with industry, regional communities, stakeholders and consumer groups on the recommendations.

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