USO fund eyed by Greenfields network builders

No applications yet for slice of $145m pot.

The Federal Government was yet to receive an application for a carrier other than Telstra to take on the universal service obligation (USO) in new housing estates, despite laws that make it possible.

A spokesman for the Department of Broadband, Communications and the Digital Economy (DBCDE) told iTnews that Division 6 of Part 2 of the Telecommunications (Consumer Protection and Service Standards) Act 1999 allowed for "universal service providers other than Telstra in designated areas."

"Telstra is currently the sole universal service provider for all of Australia, however the Act makes provision for competing universal service providers to be gazetted," the spokesman said.

Any carrier that opted to take on the USO could also take a slice of the purse that currently went to Telstra to fulfill its USO obligations. In 2008-9, that was worth just over $145 million.

"The Act does provide a mechanism for the funding of competing universal service providers under Division 13 of Part 2, however, the Department is not aware of any person having sought to become a competing universal service provider," the spokesman said.

Requests for further legal interpretations of the legislation by the Australian Communications and Media Authority (ACMA) were referred to the DBCDE.

The USO was firmly back on the agenda after Telstra's decision to stop rolling out copper networks in new housing estates ahead of the Federal Government's fibre mandate in July.

Although Telstra in some cases used Next G to fulfill its USO obligations, it was hoped the obligations would be fulfilled by fibre infrastructure in the future.

But that imposed a shift in the funding model relied on by housing developers.

Instead of developers getting communications infrastructure for ‘free' - with Telstra funding it by a mix of USO money and annuities off line rental - developers were now required to pay upfront for Telstra or another network builder to deploy fibre in their estate.

The upfront cost for this was anywhere between $1,500 and $2,500 per lot.

There was growing discontent in some circles that Telstra would continue to receive USO funding under a fibre-only model -  funds it could use to offset its costs and discount the upfront cost of fibre deployment to developers.

It was understood the offset could be as much as $750 per home, making Telstra potentially more attractive to developers than rivals such as OPENetworks, OptiComm and others who were charging the full $2,500 per home.

At least one player spoken to by iTnews - OptiComm - confirmed it was "examining the option to take on the USO obligation in new estates."

Others such as OPENetworks' strategy and legal counsel Michael Sparksman were cautious about taking on the role in the face of an uncertain regulatory future in the telecommunications space.

"The reason why we haven't made an application [to the Government to take on the USO] is simply because we're not certain what the effect of the NBN will be," Sparksman said.

"We could deliver the USO but if the Government changes the rules over the next few months, where does that leave us?"

Sparksman said clarity from the Government and NBN Co on issues such as any plans to ‘nationalise' network assets deployed by private builders - including those of Telstra and others - was needed before the likes of OPENetworks would apply to take on the USO.

He instead outlined a preference that the Government appoint a "local area operator as the service provider committed to the USO and proportionately deploy some of the [USO] funding" to them."