Billions at risk for Telstra in govt decision

Billions at risk for Telstra in govt decision


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Each year Telstra receives $253 million to supply fixed line telephones and $44m for public payphones. Rival telcos are set to win if Telstra's contract is terminated.

Each year Telstra receives $253 million to supply fixed line telephones and $44m for public payphones. Rival telcos are set to win if Telstra's contract is terminated.

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Telstra could lose billions in revenue if the government decides to scrap the Telecommunications Universal Service Obligation (TUSO).

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TELSTRA could lose billions in revenue if the government decides to scrap the Telecommunications Universal Service Obligation (TUSO). 

The TUSO was legislated in the 1990s to ensure every Australian had equitable access to a standard telephone service, including pay phones. To fulfill this obligation each year the government pays Telstra a whopping $253m to supply fixed line telephones and $44m for public payphones. 

The Productivity Commission is currently scrutinising the relevance of the obligation in today’s digital society. Its inquiry has given a platform for rival telcos and industry bodies to call for an end to the $300 million “subsidy” which they say Telstra pockets each year with “no questions asked”.

“The TUSO of today sends money directly to Telstra under a contract… nobody knows what it contains... it’s without any monitoring. It’s scary,” said Vodafone Australia’s chief executive Iñaki Berroeta.

Mr Berroeta’s comments side with the Productivity Commission’s draft report into the obligation which questioned the transparency of Telstra’s costly contract and its low levels of accountability. It questioned why, given rapid pace of technology change, the government had signed a deal to pay Telstra $3 billion over the next 20 years – an “extraordinarily” long time frame.

Vodafone and Optus have both claimed Telstra is over-charging the government for the service it provides.

Optus has estimated the annual cost to provide the TUSO should only be around $20m. It has also claimed the cost of Australia’s fixed line infrastructure has fallen drastically over time, but Telstra’s costings haven’t reflected this.

In its submission the productivity commission, Optus stated: “Annual fixed line operating expense per service has more than halved from $784 in 1990 to $351 in 2015.”

An Optus spokesperson said reforms to the TUSO should stop payments to Telstra. It believes the National Broadband Network, in conjunction with mobile infrastructure, could fulfill the obligation to provide all Australians with voice services. 

Rival telcos have weighed into the debate with force because they help foot Telstra’s bill. Funding for the TUSO is met through an Australian Government (non-indexed) contribution of $100m a year and the rest through an industry levy.

Telstra, however, contends it is the largest single contributor of funding to the TUSO (providing even more funding than the Federal Government) with an annual contribution of around $140m.

Scrapping or renegotiating the obligation could be a costly exercise given it’s likely the government would need to compensate Telstra for lost future earnings.

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