The Universal Service Obligation (USO) is a legislative requirement for the nominated Universal Service Provider (currently Telstra) to ensure every household in Australia has access to a Standard Telephone Service (STS).

In an address to the National Press Club on 27 June 2007, then Communications minister Senator Helen Coonan announced the commencement of a review of the USO. The review was to look at the obligations on industry and determine whether the load is being shared equitably as was its intention.

For example, should one carrier be required to be the Universal Service Provider in a Greenfield estate when another company has been awarded the contract to be the infrastructure provider for that estate? Or should the company that wins that contract also bear the responsibility for the provision of a telephone service in that estate? In my opinion NO! I am with Telsta on this one and it should be the responsibility of the local carrier.

In August 2007 the Communications Alliance (formally ACIF) hosted the USO in Greenfields workshop to generate discussion with the industry as to the requirements of the service obligation within new housing estates.

It has become increasingly common for developers to build their own local networks or outsource that via a contract to another carrier which may not be Telstra. There are now 58 communities in Australia which are serviced predominantly by other carriers. Generally these companies will provide a full suite of services including broadband, television and voice over that network. In some cases, as an incentive to invest in these areas which take time to grow and become economically viable, the developers grant an exclusive license to the carrier for a fixed period of time.

Despite the fact that these companies have put in brand new, state-of-the-art fibre optic telecommunications infrastructure, the legislative requirements still demand that Telstra provides the Universal Service Obligation. In most cases, to do this, Telstra would have to duplicate infrastructure to provide a Standard Telephone Service which is manifestly inefficient, uneconomic and unfair. The problem is further exacerbated where the provider does not make voice services available (e.g. in the case of Somerly, Western Australia) and Telstra as the USP is then required to provide those services.

At the Greenfields workshop and in their public submission to the review, Telstra voiced their opposition to the duplication of infrastructure, instead suggesting it should be the local incumbent carrier’s responsibility to provide the Universal Service Obligation. It has also been suggested that Telstra could seek wholesale access over that network to provide the USO, but they have rejected this based on:

  • Not sound from and economic perspective;

  • Puts more cost into the USO system;

  • Increased contractual arrangements which add to legal fees;

  • Complexity of interconnecting with multiple different networks.
As the current situation stands, Telstra is required to provide every household with a Standard Telephone Service and will do so until the legislation is changed. However what is happening in many of the estates where the telecommunication contract has been awarded to another carrier, Telstra prefers not to duplicate the infrastructure. Instead where a resident demands to be serviced by Telstra with a telephone, they are using wireless technology (most likely NextG) to deliver that Service Obligation; a reasonable situation particularly if they had to install infrastructure throughout the estate to service only a few customers.

To ensure the effective operation of the USO in Greenfield estates Telstra has proposed a number of legislative changes which could automatically require the local access infrastructure provider to become the USP for that area. The following is their outline for such a legislative provision extracted from their public submission to the USO review:
  • identify the point in time at which an access infrastructure provider would be determined to be the USP. Appropriate time may be on appointment as an access infrastructure provider by a developer. Where there is a delay between the appointment and the provisioning of telecommunications services, the USP be required to provide interim services;

  • provide a mechanism to confirm the identity of the access infrastructure provider;

  • provide a mechanism to identify the universal service area in respect of which the access infrastructure provider becomes the USP;

  • set up a central, public register for USPs so that it is clear which USP operates in which universal service area;

  • reinforce that there is one USP per universal service area;

  • provision for termination, suspension and transfer of USP status of infrastructure.
Most of the providers would welcome taking on the USO responsibility for their designated areas, however only if their obligation is matched by receiving a contribution for taking on that obligation and also not having to contribute a portion of their revenue to the USO as is currently the case.

The review of the Universal Service Obligation is still continuing.


At 16 July, 2008 14:19 Anonymous said...

I agree, the local carrier should pick up the USO. They should also have to ensure their Access Networks are up to an Australian Standard to ensure QoS. This will help prevent communities being lumbered with add hock solutions with minimal or no flexibility for future enhancements. One thing is certain in IT/Comms and that is change.

At 16 July, 2008 23:58 Stephen Davies said...

There are a number of standards which are relevant from the Communications Alliance relating to QoS.

There is also specific requirements regarding the Standard Telephone Service which is not being adhered to by many of the VoIP providers.

In my opinion the ACMA should be taken more action to ensure some of the regulatory rules which exist are being enforced.

At 23 July, 2008 11:12 rowcom said...

As someone who has reviewed possible FTTH/FTTP developments over a number of years, I believe that the USO issue is one of the most critical considerations in encouraging greater development of FTTH network infrastructure.

It is the USO that gives Telstra the right to overbuild any FTTH network, with potentially an extremely negative impact on the FTTH network business case.

In a greenfields project, the property developer should have the right to enter into an agreement with a non-Telstra carrier for the provision of a full set of default services. The FTTH carrier should be required to accept USO responsibility for the community covered by the FTTH network and should be accredited as the USO carrier for this purpose.

In this circumstance Telstra should not have any rights to build a separate network but should be required to deliver service to its customers within the FTTH community via the FTTH network, involving payment of an appropriate access fee.

The FTTH carrier should continue to contribute to the USO "pool" and would be entitled to any cost support payments out of the pool, in exactly the same manner and under the same conditions as currently is the case for Telstra.

In brownfields areas the FTTH carrier will be overbuilding the existing Telstra network. In this case both Telstra and the FTTH carrier should be USO-accredited and should share any cost support payments from the "pool" (unlikely to be any) on the basis of the proportion of customers served within the community.

In the brownfields environment there should be no FTTH business case assumption that Telstra will access the FTTH network to deliver services to its existing customers. That would be a matter for subsequent commercial negotiation.

These general arrangements would both encourage competition and result in overall service enhancement for consumers.

At 23 July, 2008 22:17 Stephen Davies said...

Excellent comments there Rowcom. I think you have described the requirements exactly. Lets hope the outcome of the ACMA review is long these lines.


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