Productivity Commission opens the door for mobile alternative to USO

The Productivity Commission has canvassed the potential for the federal government’s mobile blackspot program to provide the model for Telstra's future universal service obligation.

The USO ensures all Australians access to a standard voice service, predominantly through the provision of fixed-line voice and payphones on Telstra's copper network. It is tied to the customer service guarantee (CSG), which sets a standard for how the service is delivered.

In its issues paper [pdf], which was released today as part of the consultation process into the future of the USO, the Productivity Commission noted there was “generally strong competition” in Australia’s consumer retail mobile market when compared to the fixed line market.

“Telstra, as the primary USO provider and a fixed-line infrastructure owner, is particularly dominant in regional and remote Australia,” the paper states.

“There is often no choice of service provider in these areas as other businesses do not find it economically viable to supply services that attract only a small number of new customers.”

The paper points to figures from telecommunications industry watchdog ACMA that show 29 percent of Australians have disconnected their fixed-line voice service in favour of using a mobile phone.

It notes that there are currently 32 million mobile handsets in operation, compared with just 9 million fixed lines.

"Like some consumer safeguards, programs expanding mobile phone coverage may be also seen as promoting universal services provision or access," it states.

The paper also highlights the increased use of home wi-fi along with the NBN rollout, describing voice over IP and messaging services like Skype, Viber, and Facebook as “close substitutes to traditional forms of telephone and messaging services”.

Discussing how services in remote and rural areas are funded internationally, the Productivity Commission noted there was significant variation between OECD countries, with Germany relying entirely on the free market, while in the Czech Republic services are fully funded by the government.

Against this backdrop, the commission said there was limited data on either how many fixed line services are actually provided under the USO, or how demand for these services has been affected by the NBN rollout.

The main areas the commission is looking for information on include:

• what objectives are appropriate for a USO arrangement or a replacement scheme
• the scope of the services needed to achieve those objectives
• whether additional federal government intervention should be directed towards specific sections of the community, including low income, rural and regional households
• who should bear cost or regulatory burdens from those interventions
• the optimal funding model(s)
• what transitional arrangements from the current USO model are needed.

“We expect we will hear from our major telecommunications providers on this issue but we are also interested in hearing from individuals, local government and anyone who has a view on the current universal service obligation and future directions for change,” commissioner Paul Lindwall said.

Telstra competitor Vodafone has long criticised the subsidy, labelling it an "unneccessary, wasteful duplication" given NBN's satellite and fixed wireless rollouts, and has advocated replacing it with ongoing funding for new mobile phone towers in regional areas.

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

The inquiry into the program was officially announced in April as part of the federal government’s response to the regional telecommunications review.

Submissions for the inquiry are open until July 21 through the Procuctivity Commission’s website, with a draft report to be released in December ahead of the final report scheduled for April 28 next year.