Business

Telstra deal costing taxpayers millions will be scrapped

Telstra has turned many of its inner city payphones into free Wi-Fi hotspots for customers.
Telstra has turned many of its inner city payphones into free Wi-Fi hotspots for customers. Andy Rogers

A DEAL that sees Telstra receive millions of dollars a year from the taxpayer to ensure all Australians have access to a telephone line should be largely scrapped in the next few years.

That's the recommendation delivered today by the government's Productivity Commission, which called the Universal Service Obligation (USO) deal "anachronistic and costly" and said "it should be wound up by 2020" to coincide with the completion of the National Broadband Network.

The suggestions made in the final report are hardly surprising given that a draft report published in December called on the government to abandon parts of the current agreement, calling it "anachronistic" and "obsolete".

The 20-year contract, which has a net value of $3 billion, is set to run until 2032, and means the country's major telco receives millions in funding to ensure those who aren't catered to by the market have access to a standard telephone service.

As part of the agreement - which was first introduced in the 1990s - Telstra also provides payphones to all Australian towns.

About half the funding comes from taxpayers while an industry levy is used to subsidise the rest, meaning the likes of TPG, Optus and Vodafone subsidise Telstra to deliver phone services to Australians in the bush.

The commission's report said the impending completion of the NBN and improving mobile network coverage meant "more than 99 per cent" of premises would have access to reliable and affordable voice services effectively making the USO agreement unnecessary.

"The commission's assessment is that the service level provided by NBN, combined with existing mobile networks will be more than adequate to meet a baseline level of broadband and voice service availability for the vast majority of premises across Australia - particularly for all premises in the NBN fixed-line and fixed wireless footprints, and those in the satellite footprint with adequate mobile coverage," it said.

The report called the current agreement a "blunt instrument with a one-size-fits-all approach to universal service provision" and called on the government to renegotiate and scrap much of the deal with Telstra.

"While Telstra may have acted with goodwill in fulfilling its contractual obligations, these arrangements no longer serve the best interests of the Australian community," it said.

The deal has long been a source on contention for the telco industry. Complaints from competitors such as Vodafone typically centre on the fact that there has been very little oversight as to exactly how Telstra spends the money it receives each year.

Vodafone led the charge against the current USO deal, calling it "opaque, inefficient, inflexible and (an) outdated model which delivers poor outcomes for consumers at the cost of substantial distortions to competition," in its report to the Commission's inquiry.

Senior lecturer in political science at the school of government and policy at the University of Canberra, Michael De Percy, told news.com.au last year that it was clear the agreement was "leftover from the past".

"It's fairly obvious that it needs to be more transparent," he said. "Because it's opaque and Telstra wants to keep it, it's obvious that it's to their advantage."

Telstra has previously said it remains supportive of changes being made to the USO but points out that it will take some time to properly consider all the implications for remote Australians.

"We need to make sure that we fully understand the impacts this could have on customers before taking any action that could see remote customers left without a reliable service," the company said.

As the Productivity Commission's report points out, transitioning away from the current USO could take "a few years" but the "transition process needs to start immediately," it said.

"The fundamental roadblock posed by the opaque contract with Telstra, and the surrounding legislative architecture, should be addressed promptly and systematically."

But it remains to be seen how aggressively the government will pursue the recommended changes.

"Implementing the recommendations put forward in this inquiry will clearly require a major renegotiation of the contract," the Productivity Commission noted.

News Corp Australia

Topics:  editors picks productivity commission telstra


Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

Just add some heavenly ingredients

LOAVES MADE WITH SUNSHINE: Catherine Wray with staff member Alana Demetriou.

Fresh bread with added sunshine

A farewell to Garth

Garth Madill addressed the 250-strong  public celebration of the life of Garth Prowd

Community farewells Garth Prowd

Hot and dry conditions spark weekend infernos

DESTRUCTION: A fire at Noosa North Shore destroyed three houses and damaged two others.

Noosa was ablaze with at least three separate fires at the weekend

Local Partners

Speak up for road safety this week

Emergency services are encouraging community groups to get involved with Road Safety Week this week to advocate responsible driving and awareness.

Painting a brighter future for koalas

WORTH SAVING: The Queensland Koala Crusaders' Community Crowdfunding Campaign aims to raise $30,000 towards the cost of planting 10,000 trees for koalas.

Queensland Koala Crusaders have launched a crowdfunding campaign

REVEALED: Liam Gallagher is coming to Falls Festival

English musician, singer, and songwriter, former lead singer of the rock band Oasis, Liam Gallagher performs during his concert at National Olympic Sports Center in Beijing, China, 10 August 2017.

He revealed the news ahead of the official line up announcement

GoT's mind-blowing dragon theory

THE shock ending to Game of Thrones’ latest episode divided fans, but a theory about the show’s dragons could explain it.

Massive talent from little folk on show in Little Big Shots

Shane Jacobson hosts Little Big Shots.

Shane Jacobson has as much fun as his guests in new talent show.

‘I’m pissed off’: Bachelorette finally loses it

Matty is made take Elise on a date by her dad.

UNREST is brewing in the Bachelor mansion.

What's on the big screen this week

Domhnall Gleeson and Tom Cruise in a scene from American Made.

TOM Cruise is flying high in Doug Liman's drug drama American Made.

Bride and Prejudice's Chris reveals more family heartache

Grant and Chris feature on the TV series Bride & Prejudice. Supplied by Channel 7.

His dad’s health has dealt a massive blow to their happy life

Nicole's ready to bust out of Doctor Doctor's love triangle

Nicole da Silva stars in season two of Doctor Doctor.

New season gets a fresh injection of relationship dilemmas.

In the heart of Mooloolaba

Stand out from the rest.

Open for inspection homes August 24 - 30

Check out this weekend's homes open for inspection.

Rapid rise in growth for the Sunshine Coast

Coast transforms from beach culture to sustainable community

Outstanding location and size

Character home on 690sq m with medium density zoning near the river

Strangers restore home after trashed by drug-addicts

Strangers restore home.

A Towoomba man was facing the prospect of never renting again

Ready to SELL your property?

Post Your Ad Here!