ALP Senators' Report
Labor Senators acknowledge the fundamental importance of the
Universal Service Obligation in ensuring the equitable delivery of
telecommunications services to rural and regional Australia.
Labor Senators condemn the Government for its continuing
push for the full privatisation of Telstra, a policy that will inevitably see a
decline in services to rural and regional Australia.
Labor Senators note that the Government has sought to
portray competitive tendering of the Universal Service Obligation as both the
solution to the decline of services to rural and regional Australia following
on from the partial privatisation of Telstra, and as an argument for full
Labor Senators note the Government’s own admission of the
limitation of the scope of its competitive tendering policy by requiring
Telstra to remain as the Primary Universal Service Provider (‘PUSP’), or
carrier of last resort, in the two proposed pilot project areas.
Labor Senators believe that the Universal Service Obligation
(‘USO’) must be upgraded in the future to encompass access to minimum digital
data services, and condemn the Government for continuing to ignore the growing
need for reliable data services for Australians in remote or isolated
In this context, Labor Senators support the trial and proper
evaluation of USO contestability on a local, regional or niche basis.
Senators recommend that the Telecommunications
(Consumer Protection and Service Standards) Amendment Bill
(No. 2) 2000 be amended
- provide for a public and
independent review of the two trials and subsequent report to Parliament, that
review to take place before further Universal Service Obligation contestability
decisions are considered;
- retain Telstra as the
national PUSP and to remove the provisions allowing a carrier other than
Telstra to become a PUSP;
- remove the ability of the
Government to appoint a carrier other than Telstra as a PUSP for an area if an
agreement is entered into under either section 56 or 57 of the Telstra
Corporation Act 1991 as currently permitted by the Act. This will ensure
that Telstra continues as the PUSP for all of Australia, including for those
Australians living in the extended outer zones, approximately 80 percent of the
require a PUSP or Competing
Universal Service Provider (‘CUSP’) who offers an Alternative Telephone Service
(‘ATS’) to fully inform customers of the different service and price
arrangements available under the ATS as compared with the Standard Telephone
- require a PUSP or CUSP to
publicly consult on initial and subsequent marketing plans where an ATS is
materially different from any ATS that has been previously approved.
- provide that the level of USO
subsidy received by a PUSP or CUSP is proportionately lower if the standard of
service available under an ATS is lower than the standard of service available
under the STS.
- require the Minister to
receive advice from the ACA before setting the level of USO subsidy.
The Telecommunications (Consumer Protection
and Service Standards) Amendment Bill (No. 2) 2000 (‘the No.2 Bill’)
provides for the repeal and substitution of the universal service regime in the
existing Part 2 of the Telecommunications (Consumer Protection and Service
Standards) Act 1999 (‘the Act’).
Part 2 of the Act currently
imposes a Universal Service Obligation (USO) on Telstra to ensure that standard
telephone services (ie. voice telephony), payphones and prescribed carriage
services are provided to all people in Australia on an equitable basis,
wherever they reside or carry on business. The complementary digital data
service obligation (DDSO) underpins access on request to a 64 kbps (or
comparable) data service.
Part 2 of the Act also
provides for the funding by telecommunications carriers of the cost of
providing the USO and the DDSO.
The Government has been
exploring options for the introduction of contestability for the provision of
On 23 March 2000, the
Government announced a number of initiatives in relation to the provision of
universal service in Australia and of untimed local calls in remote Australia.
In broad terms, the Government said it would:
- enhance industry certainty by
enabling the Minister to determine a universal service provider’s net universal
service cost (NUSC) in advance for 2000-01 and subsequent financial years, for
up to three years in advance;
- undertake a competitive
selection process to award the $150 million allocated for the provision of
untimed local calls in remote Australia (the Extended Zones), with the
successful tenderer subsequently becoming the universal service provider for
- amend the universal service
regime to allow for contestability of its provision;
- undertake two pilot schemes
in regional Australia to trial the competitive supply of services under the USO
with Telstra as the carrier of last resort; and
- extend the funding base for
the USO and DDSO to include carriage service providers as well as carriers.
(Consumer Protection and Service Standards) Amendment Act (No. 1) 2000
(‘the No.1 Bill’) amended the Act to implement decisions (a) and (b).
The No.2 Bill and the Telecommunications
(Universal Service Levy) Amendment Bill 2000 (‘the Levy Bill’) seek to
provide the legislative framework necessary to implement the Government’s other
On 23 August 2000, the
Government announced that the two USO contestability trials would be conducted
the Greater Green Triangle of
south-west Victoria and south-east South Australia, expanded to include the
Central Goldfields and Greater Bendigo; and
- North-east New South Wales
and the Queensland Downs, stretching from Kempsey in New South Wales, inland,
to Caloundra Shire in Queensland.
The Government has
determined that the provision of payphone services and the DDSO will not be
contestable. It has also determined that Telstra will provide a safety net service,
by continuing as a carrier of last resort or Primary Universal Service Provider
(‘PUSP’) in the two trial areas.
Labor Senators’ Overall
Labor has publicly
stated its cautious support for the trial and proper evaluation of USO
contestability on a local, regional or niche basis.
Labor Senators recognise
that contestability may provide better service to customers in USO areas, while
reducing the cost to industry through a reduction in the USO Levy.
However, Labor Senators
also acknowledge that USO contestability may not have this outcome. In
particular, Labor Senators recognise the views of the Communications,
Electrical and Plumbing Union that:
. . . the Government is venturing into unknown and highly problematic
Senators believe that any move to contestability of the USO must proceed on a
cautious and considered basis.
support the trial and proper evaluation of USO contestability on a local,
regional or niche basis.
The No.2 Bill goes well
beyond that necessary to implement the two trials proposed by the Government.
In fact, the No.2 Bill would permit a move to full contestability of all
aspects of the USO, albeit subject to parliamentary scrutiny through
disallowance of most of the key decisions.
Labor Senators are
concerned that USO contestability should not be extended until the two trials
have been properly evaluated. Telstra’s submission supports this view “as a
matter of public policy due diligence”.
The No.2 Bill
should be amended to provide for a public and independent review of the two
trials and subsequent report to Parliament, that review to take place before
further USO contestability decisions are considered.
Primary Universal Service
The No.2 Bill
establishes Telstra as the PUSP, or carrier of last resort, for all service
areas and for all USO services until such time as another person is declared
the PUSP. A declaration that a carrier other than Telstra should become the
PUSP for a given geographical area and service will be a disallowable
Labor has publicly
stated that, if contestability is to be introduced, Telstra should be the PUSP
for all parts of Australia. Australians are entitled to expect that Telstra,
as the national carrier, will continue to be there for them.
Labor Senators believe
that the introduction of competition is just that, a means to provide
competition for Telstra in the provision of basic telephone services. It
should not be used as an excuse or reason to allow Telstra to withdraw from
providing these services altogether.
should continue to be required to make its services available to customers
across Australia. Not only will this ensure that basic telephone services
continue, it will also help to ensure that competition occurs in those areas
where other carriers decide to offer their services.
The No.2 Bill should be amended to retain Telstra as the national PUSP
and to remove the provisions allowing a carrier other than Telstra to become a
In this regard, Labor
has criticised the Government’s failure to require Telstra to continue as a
Universal Service Provider if it fails to win the $150 million tender for the
provision of untimed local calls in the extended outer zones. These zones make
up approximately 80 percent of the Australian landmass.
The No.1 Bill
automatically makes the winner of the $150 million tender the sole PUSP for
that area. Unlike the proposed two trials, there is no provision for Telstra
to continue as the PUSP. Accordingly, if it does not win the tender, Telstra
will not be required to provide a safety net service for the 40,000 customers
in the outer extended zones.
representatives told this Committee:
MR BRADLEY: We would then look at the provision of services in those
areas on a commercial basis.
SENATOR BISHOP: What does ‘on a commercial basis’ mean?
BRADLEY: It means we may not service every customer in those areas. We will
have to assess that as we get there. In those outer extended zone areas, some
of our infrastructure is quite new and some of it is quite old; some of it has
high costs and some of it has lower costs; some of the customers are more
profitable and some are less profitable, and some are quite loss-making. So I
suppose it is a matter of going through those circumstances and deciding where
we can legitimately provide service.
This change has occurred despite a lack of
consultation with or the consent of the 40,000 Australians living in the outer
extended zones. Because of the strict probity requirements surrounding the
tender, those Australians will not be consulted before the tender is awarded.
The tender will not deliver customers in the
outer extended zone choice and is inimical to Telstra’s status as the national
Labor Senators are also concerned that the
Government may exclude Telstra as the PUSP from other areas of the Australian
landmass without seeking the approval of the Parliament. Agreements, such as
that relating to the provision of untimed local calls in the outer extended
zones, entered into under either section 56 or 57 of the Telstra Corporation
Act 1991, are not disallowable. Subsection 20(2) of the Act deems the
successful tenderer to be the regional USP for the area and services covered by
The No.2 Bill
should be amended to remove the ability of the Government to appoint a carrier
other than Telstra as a PUSP for an area if an agreement is entered into under
either section 56 or 57 of the Telstra Corporation Act 1991 as currently
permitted by the Act. This will
ensure that Telstra continues as the PUSP for all of Australia, including for
those Australians living in the extended outer zones, approximately 80 percent
of the Australian landmass.
Both PUSPs and CUSPs
will be able to seek the approval by the ACA of a marketing plan to supply one
or more Alternative Telecommunications Services (‘ATS’) in fulfilment of the
USO. The ACA must be satisfied that the ATS will appropriately fulfil the USO
before an ATS can be offered to customers. The ACA must also be satisfied that
the marketing plan appropriately deals with relevant matters.
The Department has
accepted than an ATS may be of a lesser standard than the Standard Telephone
Service (‘STS’) (ie. it may not include untimed local call access).
Customers will have the
option of whether they accept an ATS or default to the STS.
Both Telstra and the
Communications, Electrical and Plumbing Union expressed concern that customers
may not be fully informed about the consequences of accepting an ATS.
The Government has
stated that this concern will be addressed in the proposed marketing plans,
although there is no direction to the ACA to this effect.
Labor Senators believe
that this is a matter that should be put beyond doubt by being clearly spelt
out in the legislation. Labor Senators believe that customers should be able
to make informed decisions about the suitability of an ATS to their circumstances.
The No.2 Bill should be amended to require a PUSP or CUSP who offers an
ATS to fully inform customers of the different service and price arrangements
available under the ATS as compared with the STS.
PUSPs and CUSPs may be
required to consult publicly on their marketing plans. The No.2 Bill contains
no guidance to the ACA as to when this consultation should occur. This should
The No.2 Bill should be amended to require a PUSP or CUSP to publicly
consult on initial and subsequent marketing plans where an ATS is materially
different from an ATS that has been previously approved.
Standard Telephone Service
PUSPs will be required
to provide the Standard Telephone Service. However, CUSPs are not required to
offer the Standard Telephone Service, although they may do so if they wish.
The Department accepted
in evidence that the provision of an ATS could cost less than the provision of
an STS but would attract the same level of subsidy.
This breaches the
principle of competitive neutrality.
Telstra has proposed
that the level of subsidy should be reduced in proportion to the degree to
which an ATS falls below the standard of the STS. This would reduce the
obvious market incentive for PUSPs and CUSPs to push customers to accept an ATS
of a lower standard than the STS as a means of generating profit, rather
promoting means of delivering the STS or an ATS in a more efficient way.
The No.2 Bill should be amended so that the level of USO subsidy received
by a PUSP or CUSP is proportionately lower if the standard of service available
under an ATS is lower than the standard of service available under the STS.
concern that competing Universal Service Providers could engage in arbitrage
through the reselling of Telstra’s STS. 
The Department of
Communications, Information Technology and the Arts expressed the view that
building a business based purely on arbitrage would be a “very difficult
business . . . to sustain.”
The Department argued that, in the event of arbitrage, Telstra would approach
the ACCC immediately to have the access arrangements varied. The Department
argued that it would not be in the long-term interest of end-users of
telecommunication services for arbitrage to be permitted. The Department also
argued that resale should be allowed in some circumstances.
Labor Senators accept
the Department’s evidence and will monitor whether the Bill creates actual and
sustainable examples of arbitrage. If arbitrage does occur and is not
subsequently prevented by the ACCC, Labor Senators would support
reconsideration of this issue.
Universal service subsidy
The Minister will
determine USPs’ subsidy entitlements for up to three years in advance.
Subsidies will be able to be determined in respect of one or more service
obligations under of the USO in respect of one or more service areas. Because
of their fundamental importance to the operation of the scheme, such
determinations will not be disallowable.
Labor Senators have
previously stated their support for this approach.
The Minister will be
able to request the advice of the ACA in setting subsidies. The Minister’s
request will be able to specify principles, including the methodology, the ACA
is to have regard to in preparing its advice. Use of the current methodology
(efficient provider avoidable cost less revenue forgone) will be an
When the Committee
considered the No.1 Bill, the Communications, Electrical and Plumbing Union
raised concerns that the Government’s approach reduces the role of the ACA in
developing and administering a methodology for the calculation and collection
of the USO cost and Levy.
The CEPU repeated its call in its submission to the current Inquiry. Telstra also expressed
concern about the potential lack of consistency in setting the USO.
For these reasons, Labor
Senators have consistently argued that the Minister should receive advice from
the ACA before setting the level of USO subsidy.
It is recommended that the No.2 Bill be amended so that the Minister is
required to receive advice from the ACA before setting the level of USO
Senator Mark Bishop
Senator the Hon. Nick Bolkus
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