No chance the USO will be dumped

James Riley
Editorial Director

There is “absolutely no chance” that government will end the Universal Service Obligation (USO) at the end of its review of the system, according to Telstra Group Director of Corporate Affairs Tony Warren, who speaking at the CommsDay Congress 2016 recently in Melbourne.

As part of its review of the USO, Treasurer Scott Morrison directed the Productivity Commission to carry out a broad inquiry that is considering a broad range of options.

These options include: ending the USO, adding broadband to the USO and including mobile cellular as a means to deliver a revised standard telephone service.

Difficult Connection: The Productivity Commission is looking at the USO, but are its hands already tied?

The USO safeguards the provision of key public interest telecommunication services including standard telephone services, payphones, emergency call services and the National Relay Service, at a cost to the Federal Government and to the telecommunications industry.

For people in regional and remote areas, the USO means that telecommunications infrastructure is provided at the same cost for a similar home connection in an urban area.

This subsidy has become a universal right for people in areas deemed to be uneconomic for telecommunication service provision and has been extended through government welfare to include people that are socially and economically disadvantaged.

Mr Warren stated that “Telstra is supportive of any changes to the USO” and that he thought Telstra would support changes “if they can improve the experience in regional and remote communities.”

In 2012, the Government signed a 20-year deal with Telstra for the ongoing provision of the USO and for Telstra to be the fixed-line telephone service provider of last resort, something that Telstra’s extensive experience and networks makes it a natural fit.

But with the introduction of the National Broadband Network (NBN) that is to replace Telstra’s fixed-line access networks, there is a question as to why NBN Co cannot provide the USO in coming years.

NBN and the USO

Up to $56 billion is being spent on the NBN and the rollout is expected to be completed by about 2021. The NBN is a national digital access network that should be capable of providing customer access to voice, video, Internet and other digital services with high reliability and performance.

It would therefore be reasonable for taxpayers to expect the NBN Co submission to the Productivity Commission review to state that its goal is to provide everyone with access to first rate digital communications and that it was ready to provide the USO in areas where the rollout was complete.

This is a reasonable expectation as the USO service and performance requirements were introduced decades ago using technologies that are now obsolete.

But this is not what NBN Co has put in its submission where it stated that the NBN is not being designed to provide the USO and “it should not be assumed that NBN is able to expand its mission scope without addressing its funding.”

NBN Co’s contradictory submission states that “the current USO was introduced at a time when industry conditions justified addressing existing market failures. Significant changes over the past two decades in technology, government policy, industry structure, and consumer behavior (sic) mean that these market failures have been, or soon will be, addressed.”

So according to NBN Co’s opening statement, the Productivity Commission can bring the inquiry to a quick conclusion and report back to the Government that the USO is no longer required.

But just in case you read on, the NBN Co submission later states that “the USO policy focus should be on addressing availability of voice services in areas not currently served by mobile networks.”

NBN Co goes on to say that “it is important to recognise that NBN has planned, designed and deployed its networks in regional Australia specifically to deliver its mandate for broadband service availability.

In doing so, it has dimensioned and planned its network investments on the basis that voice-only services in regional Australia would continue to be provided by Telstra under its contractual arrangements with the Commonwealth.”

The NBN is a digital access network capable of providing voice, video, Internet and other digital services, so it is a mystery as to why NBN Co’s submission attempts to differentiate between voice and broadband.

A possible reason could be Coalition’s decision to reduce reliability, resiliency and performance when it gained office in September 2013, and this means the NBN will not be able to meet the existing USO reliability and performance requirements.

What is worse is that NBN Co appears to be handing much needed business to Telstra without a whimper, effectively accepting that Telstra will use the USO funds to steadily build a competing network in regional areas that can be used to provide voice and broadband.

Is there any such thing today as a ‘voice-only’ customer? Australians need access to voice calls and government information and services provided online, so why would NBN Co differentiate, after all we’re spending up to $56 billion because government realised we need better access to digital services.

There is nothing in the legislation nor in the government’s most recent Statement of Expectations to NBN Co which says voice-only services are not to be provided over the NBN and left to Telstra. If there was there would be an outcry from the rest of the telecommunications industry.

Telstra USO provider until 2032

There should be no surprise that submissions, by the major telecommunications companies, to the Productivity Commission inquiry focused on who should get a slice of the pie and how big the pie should be over coming years as the NBN is rolled-out to replace Telstra’s copper access network.

A complicating factor is the 20-year contract awarded to Telstra in 2012 for the provision of the USO.

If the government decides to alter the USO based on the PC inquiry, which is expected to be completed in April next year, then it will need to renegotiate the existing deal with Telstra, which that is worth about $290 million per annum.

In its submission to the Productivity Commission, Telstra argued that the USO needed to be maintained as it is now to ensure there was a guaranteed service utilising existing infrastructure until the NBN rollout is completed and legacy systems that rely on the public switched telephone network are migrated to the NBN.

“Consumers, communities and businesses nation-wide value the voice telephone service and would suffer personal, social and economic detriment if their basic right was revoked, no matter what other changes may be made to the obligation.”

Optus and Vodafone have taken an opposing view to Telstra, arguing that the size of the subsidy is far larger now than the number of households that require service access through the USO.

Optus put to the Productivity Commission that “despite these vast changes in technology [since the USO was introduced in the 1980s], competition and customer needs the USO has remained static. It continues as a blunt policy instrument aimed at delivering increasingly questionable outcomes over an increasingly outdated legacy technology.”

As was expected the mobile cellular operators argued against data being included in the USO as this could potentially mean that there would be regulation of data charges over their networks, which remain some of the most expensive mobile networks in the world.

The argument put by Optus that “universal access to a standard broadband service is already guaranteed under the NBN policy settings” is not correct because the NBN legislation does not set minimum service and performance requirements.

Telco submissions miss the point

The Productivity Commission has been provided with a large number of submissions arguing for an expanded USO to include broadband, to utilise all of the access network technologies including mobile cellular and Wi-Fi and several submissions, including my own, put the proposition that the USO should be enhanced to become a universal access regime that guarantees that Australians can be “always connected” wherever they work or live.

Government service transformation from bricks and mortar to online delivery means that there is an urgent need for universal access to government provided digital services including welfare, health, education and other designated services such as the existing privately provided health monitoring systems.

Recently the UK Government introduced new legislation titled the Digital Economy Bill that seeks to boost the UK’s digital economy and implement policies that include a new Broadband Universal Service Obligation.

The Bill sets the minimum broadband connection speed at 10 Mbps and includes provision for automatic compensation when their broadband service does not meet the minimum performance requirement.

Whilst the UK Government should be applauded for its effort to cut red tape and boost productivity the broadband bar has been set very low.

The US Federal Communications Commission (FCC) upgraded the definition of broadband in February 2015 to 25/3 Mbps and this means the UK Government’s broadband USO connection speed requirement doesn’t come close to the FCC’s standard.

The European Commission has set a commitment that aims to ensure that all European households can be connected to the Internet with a minimum download speed of 100 Mbps by 2025 and is currently working to introduce legislation that will make access to broadband a legally guaranteed service for all and mirroring our NBN the EU will include fixed, wireless and satellite infrastructure in their broadband USO.

Community concern

The community organisation Broadband for the Bush submitted that it “believes that telecommunications services (fixed and mobile, voice and data) are an essential service and should be categorised as a fundamental right of access under a Universal Service or similar designation.

Where markets fail or a financial inequity exists (e.g. low income) the government should fund service access to an appropriate level of availability and affordability.”

The Isolated Children’s Parents’ Association (ICPA) highlighted the need for improved access to online education services to improve the primary and secondary school education of children living in remote areas. The Association says “access, reliability, and affordability of service are the most pressing communication issues for our members.”

“Inhabitants of rural and remote areas often have no regular face-to-face access to services, and are becoming more reliant on telephone and data to facilitate access to a variety of services for health, education, business and social needs.”

The ICPA identified an example of the need for USO service and performance standards to be maintained as the transition to the NBN occurs. Currently the Telstra USO Satellite service provides a “single hop” service, with a voice delay of about 260 ms due to customers connecting directly to other satellite telephone customers without the call being routed through a ground station.

NBN Co’s Sky Muster satellite currently does not include “single hop” capability as telephone calls occur using Voice over Internet Protocol which requires that calls are routed through a ground station and this “double hop” service has a voice delay about 520 ms.

Telecommunications chaos

Mr Warren stated that “with the composition of the current federal Parliament, I see absolutely no chance at all that the government will remove the USO any time soon.”

Speaking at the CommsDay Congress, the Minister for Regional Communications Fiona Nash said “a key point of contention when discussing the USO relates to the declining use of fixed-line telephones by Australian consumers; with the rollout of the NBN, Australia is seeing a reduced demand for fixed-line voice-only services and increased demand for data across all technologies. There is also an increase in the demand for mobile services and the use of smartphone technologies.”

The challenge before the Productivity Commission is to focus on the benefits of an expanded universal access regime that opens up opportunities for increased productivity, competition and ensures that government information and services are available to everyone wherever they work or live.

Productivity and social cohesion will be enhanced through increased participation and to ensure that there is an improved user experience the existing USO service and performance requirements must be maintained or enhanced.

Dr Mark Gregory is a Senior Lecturer in the School of Engineering at RMIT University

Do you know more? Contact James Riley via Email.

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