Debunking the myths of the Universal Service Obligation

With our heritage of connecting Australians for more than a century, at Telstra we are acutely aware of the challenges regional and remote communities can face when it comes to accessing telecommunications services.

We have invested billions of dollars building the biggest and most reliable set of networks in Australia. This means we connect more people in regional and rural Australia than anyone else.

On top of our own investment, Telstra has a contract with the Federal Government to deliver what is called the Universal Service Obligation (USO). The USO rests on a simple concept – that standard telephone services are reasonably accessible to all people in Australia on an equitable basis, wherever they work or live.

A simple idea, but given Australia is one of the largest, most sparsely populated countries in the world, delivering it is no small task. We supply services from Byron Bay to Port Hedland, from the top of Cape York to the bottom of Tasmania, no matter the cost. Our contract with the Government means we receive some funding to help keep all Australians connected.

There are more than 600,000 homes, farms, businesses and indigenous communities in areas around Australia where it is generally not viable, on a commercial basis alone, to deliver telecommunications services. That is, where the costs of serving customers are likely to be too high for both customers and telcos to do so on a straight commercial basis.

This is where the USO comes in. The funding we receive helps Telstra deliver services to these hard to reach communities, who would otherwise face costs in the tens or hundreds of thousands.

For example, we are currently building out a single service to the remote community of Wattle Hills, which is about 600 kilometres north of Cairns. This will involve a radio signal being delivered via a 16 metre high antenna supported by solar powered battery back-up, and then running a copper line into the premise. This project will cost at least $100,000, which will be funded out of the USO along with all of the other services requested around Australia that are not commercially viable to build.

The USO funding does not just support new connections – it also funds maintenance of existing services. For example, this year we have had to send technicians by helicopter multiple times to the Kimberley in Western Australia to fix services at one of the most remote tourist sites in the world. Also while trying to connect a new customer in the Plainby area, north of Toowoomba in Queensland, we recently had to repair distribution cable which had been damaged by lightning strikes. The total cost of the repairs was $70,000, which without the USO would have been a huge burden for this customer to bear.

Common myths about the USO

There has been a lot of discussion recently about the USO. This is a good thing. It makes sense to check whether the USO continues to be fit for purpose. However, there has also been a lot of confusion and some misinformation from Telstra’s competitors about the USO. We’d like to take this opportunity to bust some of the myths around the USO.

Myth 1 – No one relies on the USO anymore

Around two million landline calls are made every day by people living and working outside of where the nbn fixed network will be available and where services are usually supported by the USO. In many cases, these voice services are vital connections and in fact the only connections to the rest of the world. For example, the Indigenous community of Amanbidji in the Northern Territory, 400 kilometres west of Katherine, is served by a combination of radio and copper infrastructure provided under the USO. Earlier this year, a fire damaged the cable connecting Amanbidji, leaving them completely isolated. In response, our technicians travelled hundreds of kilometres to set up a temporary solution while we undertook the permanent repairs, all supported by the USO.

Myth 2 – The USO is fully funded by taxpayers

Telstra receives $270 million per year for the USO, and only one third of that money is funded by the Government. The rest is funded by a levy on telecommunications providers. In fact, Telstra is by far the largest financial contributor to the cost of delivering the USO. We pay around $140 million each year towards the USO ourselves. So this means Telstra pays 40% more than the Government towards the USO, three times more than Optus’s contribution and 10 times more than Vodafone.

Myth 3 – Telstra has built its mobile network using USO funds

The USO exists to deliver a standard telephone service to anyone who requests one, not a mobile service. We have built the largest mobile network in Australia using our own funds, not USO funds. We have invested billions of dollars in Australia’s best mobile network and on average 15% of the investments we make in our mobile network have been directed towards building infrastructure that delivers mobile services to the most remote 2% of Australia’s population.

None of the USO funds are intended for, nor were they used for our wireless network rollout.

Myth 4 – Telstra can do whatever it wants with the USO

The USO is a profound and binding obligation on Telstra – to provide a voice service to everyone in the country upon request, no matter where they live, in accordance with the USO Determination. This is an immense challenge and carries considerable costs, which is why it is funded by an industry levy and a contribution from Government. Importantly, our USO exists alongside all the consumer protection measures that exist in the industry, including the Customer Service Guarantee which sets acceptable connection and repair timeframes, and provides for compensation for customers if these timeframes are not met.

Myth 5 – Regional communities don’t value the USO or fixed voice services

Regional communities want the best telecommunications services. As such, these communities and their representative organisations are looking for ways to extend what they receive today, including under the USO. Critically, this means protecting the services they receive today, not trading them away. As the National Farmers’ Federation stated in a submission to the Productivity Commission on the USO: A transition to voice over nbn infrastructure means many users currently receiving voice service over copper line, will have their voice service replaced by satellite which is currently unreliable. The most significant concern about such a transition are matters of safety. In emergencies a voice connection can be the matter of life and death. A less urgent, but nonetheless critical issue this also raises is how remote businesses can meet their workplace health and safety obligations. nbn itself has acknowledged that the Sky Muster satellite was not designed to provide a universal voice service.”

Myth 6 – The USO can easily be replaced by the nbn

The USO provides a valuable guarantee that no matter where you live, you can access a standard telephone service. It is also a condition of the USO agreement that a standard telephone service must be made available on request to every premise in Australia within reasonable timeframes.

nbnTM is charged with delivering high-speed broadband to every Australian and building this network is a substantial task. That is why we think the best time to review arrangements is once nbn has completed its rollout.

Once the rollout of the nbn is complete, there will be an opportunity to have a look at the USO and the best way to deliver it. However, any changes to this policy will be complex and need to be carefully designed to ensure it continues to deliver a voice service for people in regional and remote Australia.

Myth 7 – The USO is limited to regional areas

The USO is a guarantee for all Australians, no matter where they work or live, to a standard telephone service. This applies to people in urban areas as well as regional areas. A standard telephone service includes access to local, national and international calls, untimed local calls, 24 hour free access to emergency service numbers, priority assistance for those with a life threatening medical condition and operator and directory assistance. On top of that, the USO also supports thousands of payphones that we maintain around the country and are still valued by many communities.