Government to review Telstra's USO

The federal government will soon ask the Productivity Commission to undertake a review of the current universal service obligation (USO) that provides all Australians a basic telecommunications service.

Communications Minister Mitch Fifield today told the CommsDay Summit in Sydney there was a need to investigate how the current regime could be changed to better adapt to current broadband technologies and consumer expectations.

Fifield said he would soon task the Productivity Commission with looking into an appropriate model for future funding and regulatory arrangements for the USO.

"The terms of reference for that will be issued shortly," he said.

The Communications Department will undertake its own separate review on reform options more broadly for consumer safeguards, Fifield said, with a specific focus on the legislation governing consumer protection in the telco sector.

The government first promised a review of the USO in its response to the regional telecommunications review in late February, but was unable today to provide a timeframe for its commencement.

The USO ensures all Australians access to a standard voice service, predominantly provided over Telstra's copper network. The customer service guarantee (CSG) sets a standard for how the service is delivered.

Telstra is currently contracted by the federal government to deliver the standard telephone service (STS) and to maintain its public switched telephone network (PTSN) for 20 years. It receives around $300 million a year to do so.

However, the government's recent regional telecommunications review found that the current standard telephone service was declining in relevance given the boom in use of mobile devices.

Similarly, the rollout of the national broadband network will take voice calls away from Telstra's copper and onto the NBN, the review found.

"The historic nature of the STS and the accompanying USO funding arrangements means it fails to target the areas of greatest need or deal adequately with inequality of outcomes in regional Australia," the review panel wrote.

"The cost effectiveness of the USO agreement between the Australian government and Telstra is questionable."

The report recommended a new 'consumer communications standard' for voice and data be introduced to provide technology-neutral standards for available, accessibility, cost, performance and reliability.

"The standard could, for example, include such matters as social tariffs, other measures for low income groups, or the data plan exemption of selected government and education sites to improve affordability and support social inclusion," it suggested.

It did not comment on the 20-year USO contractual arrangements with Telstra - which run until 2032 - saying they were a matter for the government to address.

Infrastructure Australia similarly said earlier this year that USO funding should be directed from fixed-line to mobile services.

Telstra competitor Vodafone has long criticised Telstra's USO subsidy, labelling it an "unneccessary, wasteful duplication" given NBN's satellite and fixed wireless rollouts.

"I think there's a future for fixed line as a connectivity media, as broadband. But the thing that doesn't make sense is investing in fixed-line voice. [Yet] this is what the USO is going for," Vodafone chief Inaki Berroeta said last year.

“USO is not investing in broadband, USO is investing in voice. And voice is a functionality you can use on any technology, on any media."