Optus says Telstra's USO costs should drop to one-tenth

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Optus says Telstra's USO costs should drop to one-tenth
The ubiquity of mobile leaves less people underserved.

Not $290 million a year, but $23 million.

Telstra’s costs in meeting its universal service obligations (USO) should be “less than one-tenth” of the $290 million it receives a year, according to Optus.

The numbers form part of a fresh assessment by Optus of the USO scheme – used to guarantee telephone services for all Australians - for which Optus has long sought reform.

Provided to the Productivity Commission as part of its inquiry into the USO, Optus claims its assessment of the numbers involved in the USO support its argument that the scheme in its current form be phased out.

Optus believes the USO should be met with NBN and/or mobile services rather than copper.

It believes industry levies and government funds that pay for the current USO should be scrapped, with the costs met through “NBN Co’s wholesale access fees” or by the mobile telcos, which have commercial incentives to run networks that covered most of Australia.

Optus said its USO liabilities alone were $50 million a year: relieved of them, it could “re-invest the money… in an additional 58 greenfield [mobile] sites each year – even more if sites were shared or upgraded".

The number two carrier was particularly aggrieved as it believed Telstra received USO subsidies well in excess of the cost of servicing areas-in-need.

“The costing for the USO continues to be opaque and disputed,” Optus said.

Optus disputes the number of households assumed to be in commercially unviable areas, and therefore in need of USO-funded services. The most recent calculations assume 810,000 services in operation (SIO) qualify, but Optus claims the number should be between 100,000 and 150,000.

Its reasoning is that households in that gap would have access to mobile or satellite voice services provided by “profit-driven” companies, and therefore could not be considered to need a USO service.

Using a lower figure of USO-reliant households drastically reduces the potential costs incurred to service them.

“Estimating the net cost of the USO with the number of USO SIOs at 150,000 results in a significant lessening of the cost estimate to $22.9 million per year,” Optus said.

“Telstra continues to receive gross payments of $290 million annually for the USO voice service. And will continue to do so for a further 18 years.

“As the analysis above has demonstrated, such a subsidy is likely to be far in excess of the costs incurred by Telstra.

“A reasonable estimate of the cost of the USO is less than one tenth the current funding.”

Comment has been sought from Telstra.

Optus said the static nature of the USO "despite vast changes in technology, competition and customer needs" was another reason the scheme needed to be reworked.

“It continues as a blunt policy instrument aimed at delivering increasingly questionable outcomes over an increasingly outdated legacy technology," the telco argued.

“It is time to recognise the current policy is a high cost solution to solve a problem that no longer exists.”

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