Democrat Senators' Report
Contestability in the provision of services under the USO is
something which the government has portrayed as the remedy to all the problems
which have beset rural and regional telephone users. As we commented in our
minority report on the Telecommunications (Consumer Protection and Service
Standards) Amendment Bill No.1 2000, the Australian Democrats are concerned
that contestability is the government’s one and only real regulatory policy to
equalise the disparity in services and technologies available to those in rural
and remote Australia as compared to those in metropolitan Australia.
Supplying Services which don’t meet the Standard
Both Telstra and the CEPU commented, in their submissions,
on the ability of a carrier to market a lower-featured service (than the
standard telephone service) to consumers at a discounted price.
The ability of customers to make an informed choice about
accepting a lower-featured service at a discounted price relies heavily on the
customer being fully informed about the services or technical capabilities that
they won’t receive if they choose that service.
The Explanatory Memorandum states (at page 59-60):
In choosing whether to take an
ATS in fulfilment of the USO as opposed to standard USO services, consumers
will need to be mindful that ATS may not be subject to the same requirements as
standard USO services. An ATS supplier will be expected to identify any
divergence from standard requirements in its marketing plan and to inform
consumers of them.
The problem is that the Bill does not require the specific
identification of that divergence.
Proposed section 13Q obliges a competing universal service
provider (CUSP) to include in its ATS marketing plan appropriate terms and
conditions on which the equipment, goods or services are to be supplied.
However, there is no requirement that if the equipment, goods or services to be
offered don’t meet the specifications of the standard telephone service that
that fact should be highlighted to the consumer.
The result is that the onus is on a consumer to make a
comparison of what they currently receive as the standard telephone service and
what is being offered as the lower-featured service.
The Democrats recommend that the Bill be amended to require
that an ATS supplier identify any element of the standard telephone service
that is not met by the service it is offering in its marketing plan and to
Assessment of contestability pilots
This Bill establishes a regime which will permit
contestability in any universal service area. There is no reference in the
Bill to the contestability pilots or to the basis on which contestability will
be implemented throughout Australia.
The government does not seem to have or at least has not
announced a clear plan of what will occur in relation to contestability for the
remaining universal service areas in Australia. The approach appears to be
very much one of ‘playing it by ear’.
At the very least the Australian Democrats believe that
there must be a full assessment of the contestability pilots at the end of a
specified period, say 2 years. If after a period of 9 months, it appears that
the residents of the pilot areas are benefiting significantly from
contestability, it could be open to the Minister to commence the assessment
early, with a view to expediting the expansion of the program. However,
regardless of the time period involved, the government must not be permitted to
expand the program without a full and public assessment of the costs and
benefits of the program. The assessment and the publication of the results
need to be viewed as a precursor to any expansion of contestability.
Subject to being able to draft an appropriate amendment, the
would like to see the Bill contain a provision requiring the tabling of a
public assessment of the pilots before contestability is pursued outside the
The Democrats recommend that a comprehensive public
assessment of the contestability pilots be undertaken at the end of 2 years and
that no expansion of the contestability arrangements should occur until the
publication of that assessment.
The level of the USO subsidy
The level of the subsidy will be a key determinant to the
success of the pilots. Clearly if the subsidy level is too low, carriers will
simply opt not to compete for it. Telstra will fairly quickly recognise
whether it is likely to be subject to competition and will adjust its behaviour
and its offering to consumers accordingly.
On the other hand, if the subsidy is set too high the USO
cost will blow out and all telecommunications consumers will bear a higher
A number of submissions expressed concern that the proposed
regime may result in an increase in the USO cost. The Australian Democrats
don’t believe that an increase in the total USO cost is necessarily something
to abhor provided firstly, that it doesn’t occur because of substantial
infrastructure duplication and secondly that it is accompanied by an
improvement in the range of reasonably priced services available in the
universal service areas.
In our Minority report on the Telecommunications (Consumer
Protection and Service Standards) Amendment Bill No.1 2000 we remarked that:
As a general comment the
Democrats do not necessarily agree that competition is the best method of
achieving better services at lower costs for people in rural and remote
We believe that reviewing and
increasing the level of the standard telephone service through the USO
mechanism may be the best method, at this stage, of ensuring that residents of
rural and remote Australia are not left behind with the continual advent of new
technologies. We are disappointed that the government has not so far agreed to
legislate a periodic review of the USO standard telephone service.
Our positions in relation to upgrading the level of the
standard telephone service and periodically reviewing the standard telephone
service remain unchanged.
The Australian Democrats reserve our position in relation to
Senator Lyn Allison
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