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Telecommunications Universal Service Obligation

Inquiry report

This report was sent to Government on 28 April 2017 and publicly released on 19 June 2017.

The report recommends taking a new and modernised approach to the subsidy and support arrangements that form the current universal telecommunications services in Australia.

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  • Key points
  • Contents summary
  • In a digital age, the voice-based telecommunications universal service obligation (TUSO) — worth $3 billion over 20 years (net present value) and consisting of basic telephone and payphone services — is anachronistic and costly. It should be wound up by 2020.
  • Rapid developments in telecommunications technology are transforming people's lives. The growing demand for ubiquitous digital connectivity provides a strong case for reform that reflects evolving policy, market and technological realities.
  • The sizable public investment in National Broadband Network (NBN) infrastructure will provide high-speed (voice-capable) broadband to all premises (on request) across Australia by 2020 — at a quality that is, for the most part, superior to what has been available. Wholesale prices will also be capped nationally and across its different technology platforms. As such, the NBN has been designed to narrow the city–country digital gap with cross-subsidies from commercial to non-commercial services within a funding envelope.
  • Australians are also well served by mobile networks, with over 99 per cent of people having access to mobile telephony (and to a slightly lesser extent, broadband) where they live.
  • Leveraging off the NBN and mobile networks means that the objective of universal service can be reframed to provide baseline (or minimum) broadband and voice services to all premises in Australia once the NBN has concluded its rollout phase, having regard to the accessibility and affordability of these services. Increasingly, broadband will be the main medium for voice services.
  • For the vast majority (more than 99 per cent) of premises, the combination of the NBN and mobile networks is likely to meet or exceed minimum standards for universal service delivery. As such, the TUSO is no longer needed.
  • Current market trends and policy settings suggest that telecommunications services will continue to be affordable for most people.
  • To the extent that there are any remaining availability, accessibility or affordability gaps, current trends and policy settings suggest that these are likely to be small and concentrated. The TUSO can therefore be terminated once the NBN is fully rolled out and replaced by a set of targeted policy responses for:
    • (up to 90 000) premises in pockets of the NBN satellite footprint without adequate mobile coverage
    • cohorts of users with particular needs.
  • Programs to address these gaps should be flexible, allow for community input and facilitate informed consumer choice. Their costings should be transparent and subject to competitive tendering where feasible.
    • The narrow scope and small scale of these programs tip the balance towards funding from general government revenue as opposed to an industry levy.
  • While transitioning to this new universal service framework is complex and will take a few years, the transition process needs to start immediately. The fundamental roadblock posed by the opaque contract with Telstra, and the surrounding legislative architecture, should be addressed promptly and systematically.
  • The current pattern of disparate and siloed policy reviews and proposed legislative reform raises concerns about the coherence of policies to address universal service objectives and must be carefully managed and coordinated.

Background information

Leonora Nicol (Media and Publications) 02 6240 3239 / 0417 665 443

Chapter 1 provides relevant background to the inquiry.

Chapter 2 provides an overview of the evolving landscape of telecommunications.

Chapter 3 reviews and evaluates the current TUSO against a number of guiding principles.

Chapter 4 identifies other government programs that are broadly designed to meet telecommunications universal service objectives.

Chapter 5 examines the considerations that should frame a new telecommunications universal service policy objective.

Chapter 6 assesses the extent to which the market and NBN might address the various dimensions of universal telecommunications services.

Chapter 7 considers policy options to address any 'gaps' identified in chapter 6.

Chapter 8 discusses the relative merits of alternative funding models for telecommunications universal service policies.

Chapter 9 canvasses issues associated with transitional arrangements.

The following appendixes support the analysis in the main body of the report.

Appendix A outlines the conduct of the inquiry, including consultations undertaken and submissions received.

Appendix B provides further information on the NBN.

Appendix C presents an overview of approaches to telecommunications universal service policies in OECD countries.

Appendix D touches on the relative affordability of NBN services.

Printed copies

Printed copies of this report can be purchased from Canprint Communications.

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