Home Telecoms & NBN Final nail in coffin of USO, says Vodafone of PC report

Final nail in coffin of USO, says Vodafone of PC report

Vodafone has led the industry chorus rejoicing at the Productivity Commission’s recommendations for the winding up of the telecoms Universal Service Obligations, describing the commission’s report as the “final nail in the coffin” for the current USO.

In its scathing criticism of the USO, the telco has now urged the federal government to take immediate action to ensure regional Australia “receives the voice and broadband services it needs and deserves”. It also took the opportunity to take yet another swipe at Telstra over its role in the USO.  

Along with Vodafone’s criticism of the USO and Telstra’s involvement, the Competitive Carriers Coalition — the industry association representing the interests of non-dominant telcos — was equally critical, saying there was a need to abolish the “intolerably opaque and out of date Telecommunications Universal Service Obligation”.

And on the consumer front, the Australian Communications Consumer Action Network (ACCAN) weighed in, saying it agreed that the USO obligation needed to be updated and that it is currently not delivering as it should for consumers.

In his highly critical comments on the USO, Vodafone chief strategy officer Dan Lloyd said the commission’s report, was the final nail in the coffin for the current USO model which provides almost $300 million in public and industry funding each year to Telstra, “supposedly to fund its copper network and payphones”.

“Regional Australia deserves better. The calls for USO reform have been growing louder and stronger over recent years, and the need for change is now urgent.

“The final report has confirmed it’s all over for the USO, and the transition to a 21st century framework needs to start now.

“Almost $1 million per day is currently going into a black hole. This is a staggering sum of money which could be delivering real benefits for regional Australia.”

According to Lloyd, the final report not only confirms the fact the USO is well past its use-by-date, but highlights the “alarming lack of transparency, accountability and controls around the arrangement”.

“It is scandalous that no one outside of Telstra has any true idea how nearly $300 million a year, which includes $100 million of direct taxpayer funding, is being spent.

“It is unacceptable to taxpayers, and to the rest of the industry which contributes tens of millions of dollars a year to the scheme, that there are no accountability obligations on Telstra even to report on how much of the copper line and payphone infrastructure it has actually been shutting down, let alone the actual costs of services supplied under the USO.”

Lloyd says the final report sets out a clear plan and timetable for delivering 21st century voice and broadband services to regional Australia and he wants urgent action by the government.

“The time for debate and reports is over, and the federal government must act quickly to adopt and implement the Commission’s recommendations.

“Regional Australia can’t afford for any more time to be wasted with this report sitting on a desk in Canberra gathering dust.”

Lloyd said Vodafone acknowledged the government has established a USO taskforce to examine the report’s findings, and says the taskforce must get to work immediately “so that the government can soon release detailed plans about how it will transition to a model which delivers the best outcomes for regional Australia, taxpayers and the telecommunications industry”.

The CCC said said the Productivity Commission report was damning of the USO and it welcomed the government confirmation that it would create a Statutory Infrastructure Provider obligation on the NBN as a first step toward reform.

The organisation has previously called on the federal government to act to dump the USO Telecommunications Universal Service Obligations scheme, labelling the 20-year agreement as anachronistic, lacking transparency and overdue for reform.

“The government now should accept that the Regional Broadband Scheme — a new levy designed to subsidise rural NBN services — could not operate at the same time as the TUSO,” the CCC said on Monday.

“The two schemes are both a form of tax on competitive communications services, raising the cost of people doing business and using basic communications services.

“It is abundantly clear that the hundreds of millions of dollars in direct subsidy being paid by consumers every year to Telstra under the TUSO cannot be justified.

“The Commission has spent months examining the TUSO and yet it cannot do better than estimate the subsidy per USO service is between $250 and $2800 annually.

“Such imprecision would simply not be tolerated in any other welfare programme.

 “But beyond being imprecise, the TUSO is also unnecessary and destructive of competition – it simply does more harm than good.”

The CCC spokesman said taxpayers expect some value for money and “the PC report today makes clear no argument can be made that the TUSO meets this standard”.

“The government should immediately act to end a scheme that now stands exposed as little more than corporate welfare for Telstra.”

ACCAN said it welcomed the government’s release of the Productivity Commission report. “Broadband and voice services are essential for all consumers. ACCAN believes that all consumers, no matter where they live or work, should have access to a reliable, high quality voice and broadband service.”

While saying it agreed that the USO obligation needs to be updated and that it is currently not delivering as it should for consumers, ACCAN said it is important, however, that consumers are not made worse off by changes to the USO.

“ACCAN is concerned that regional consumers, who are reliant on satellite services and do not have adequate mobile coverage, may lose access to voice services, “ACCAN said.

“This concern was echoed by many rural and regional groups throughout the inquiry process. It is not satisfactory to reduce consumer access to voice services. While mobile services can deliver high quality voice services, it is more difficult to ensure that the service is available at each premises.

"ACCAN believes that consumers should be able to challenge the ACMA if it finds, incorrectly, that their premises has adequate coverage strength. We welcome this proposal in the report.”

And ACCAN says it is also concerned about consumers who may have difficulty moving to using mobile devices “or who face financial difficulty in doing so”.

“We are pleased to see that the following recommendations have been strengthened since the draft report was released:

  •      "That a baseline standard should be developed and adopted to ensure that broadband and voice services are available to all premises in Australia;
  •       "That ACMA should report regularly and publically on the reliability of the NBN network; and
  •       "That the ACMA identify areas that do not achieve functional mobile voice coverage that delivers adequate voice calling of a baseline quality."

ACCAN says there is a significant amount of work required before an alternative to the USO can be established and it has encouraged the government and relevant bodies to be as open as possible with the community to ensure that all consumers have adequate services “and there is sufficient time to adjust to any changes to the USO”.

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Peter Dinham

Peter Dinham is a co-founder of iTWire and a 35-year veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).