Landline funds on hold

Telcos battle over USO for landlines in bush


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The Productivity Commission says government should scrap Telstra's funding deal to maintain payphones and landlines by 2020.

The Productivity Commission says government should scrap Telstra's funding deal to maintain payphones and landlines by 2020.

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Fixed-line services obsolete, Productivity Commission says

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HOW best to spend the $300 million a year in taxpayer and industry cash Telstra receives to provide voice services to all Australians?

That is the question confronting government, following the Productivity Commission’s report on the Universal Service Obligation (USO).

The report said federal government should scrap the USO by 2020, when high speed internet via the National Broadband Network is due to be available to all Australians.

The USO is a 20 year agreement, set to expire in 2031, which funds Telstra to provide access to and maintain the fixed-line copper network for universal voice services.

Federal government has formed a taskforce to review the Universal Service Obligation, following the Productivity Commission's report.

Federal government has formed a taskforce to review the Universal Service Obligation, following the Productivity Commission's report.

Network maintenance casts had reduced since the USO was agreed in 2011 and lack of transparency and accountability in the terms of agreement made its continuation “difficult to justify”, the report said.

Telstra is not required to report on the cost of its fixed line voice service, which its competitors Vodafone and Optus argue has fallen significantly as the copper network is being decommissioned for the NBN’s fibre lines, and mobile coverage reduces reliance on landlines.

They want the USO wound back and savings directed to improving services for remote people who will continue to rely on landlines, and other troublespots like bushfire prone areas.

Telstra says it’s open to renegotiating the USO “if this results in customers receiving a better service more efficiently” and said any changes must be in the interests of regional communities.

A question looms over how much government may have to fork out for altering the USO terms.

Telstra contributes $140m a year, taxpayers chip in $100m and the rest comes from a levy on other telcos.

Communications Minister Mitch Fifield has formed a taskforce to review the Commission’s report.

No obligation

The Productivity Commission said there is no need for a USO as 99 per cent of Australians are better served by their access to universal voice and data services over the NBN and/or mobile networks..

It estimated there are about 90,000 remote customers who live outside mobile services and rely on landline services.

Government should turn its focus to telecommunications troublespots, better target the Mobile Blackspot Program to eliminate coverage gaps and use market competition to improve voice services.

The Commission said fixed lines were not completely redundant and that continued investment in remote community communications was needed.

Government should replace the USO with a competitive tendering for baseline voice services to “address any gaps in voice services within the NBN satellite footprint”.

Telco tangle

A Telstra spokesman acknowledged that parts of the copper network were being decommissioned, and superseded by the NBN in fixed line areas.

“It is worth noting too that we are by far the largest financial contributor to the cost of delivering the USO. Our contribution is 40 per cent higher than the government’s, three times larger than Optus’ and ten times larger than Vodafone’s.”

An Optus spokeswoman said the current USO “is expensive, not fit for purpose and should be reformed”.

“The market delivers access to universal voice and data services over the NBN and/or mobile networks for the vast majority of Australian,” she said.

Vodafone chief strategy officer Dan Lloyd said the available data appeared to show that roughly half of Telstra’s payphones and over 40pc of the regional copper was decommissioned over the past 10 years, since the USO began.

“This represents a saving of $175m a year, or $2.6 billion over the remaining 15 years of the current USO,” Mr Lloyd said.

“We need to be very careful we identify the minimum necessary cost for the USO. We have never disagreed there is a case for industry and taxpayer subsidies for genuine loss making regional copper network, where there is no alternative.”

Mr Lloyd said the $175m of USO savings could build an open access regional mobile network that would double mobile coverage with 350 towers a year, or 5300 in total, extending the network by 100,000 square kilometres a year, or 1.7 million km2 by 2031.

Remote rumblings

National Farmers’ Federation chief executive Tony Mahar said the Commission’s proposal to use the NBN to replace fixed-line telephone services was “ill founded”.

“Many rural and regional consumers still rely on fixed-line services to stay in touch with family, run businesses and stay connected during emergencies.”

The NFF is a member of the Regional, Rural and Remote Communications Coalition, which is comprised of 20 organisations that lobby for regional communications services.

They believe the USO should to remain until government can guarantee all premises have adequate coverage, or alternative reliable telephone services.

Many remote residents argue the Voice Over Internet Protocol service, available over the NBN’s Sky Muster satellite, has a lag in connection and is too unreliable.

The Regional, Rural and Remote Communications Coalition wants Mr Fifield’s review to set minimum standards for voice and data services for all Australians.

It said landline voice services in the Sky Muster footprint must also remain available and be upgraded, as improved technology becomes available.

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