Telstra believes that given changes in communications technology employed by Australians the Universal Service Obligation (USO) should be updated; however the USO itself should be kept, at least until the rollout of the National Broadband Network is completed.
Options for the future of USO are currently being assessed by the Productivity Commission (PC).
The scheme is intended to ensure that all Australians have access to a basic phone service. The USO is delivered by Telstra over its copper fixed-line network under contract with the government. Funding to the tune of $300 million a year is provided by the government and a telco industry levy.
The USO has been a long-standing source of irritation for Telstra's rivals, which have condemned it as outdated and an unnecessary subsidy for Australia's largest telco.
Optus last year estimated that Telstra had received almost $882 million since 1997 to deliver the USO. Vodafone has argued that the USO is "hugely inefficient" and "obsolete", particularly given the popularity of mobile phones and the ongoing rollout of the NBN.
The USO "remains rooted in principles more applicable to the analogue era of telecommunications," Optus argued in its initial submission (PDF) to the PC's inquiry.
"It is predominantly focused on the delivery of fixed voice handsets and voice calls over fixed line copper connections. The widespread deployment and use of mobile, data and broadband services now render it increasingly inappropriate."
The telco argued that the copper network has been overbuilt by the mobile networks of Optus, Vodafone and Telstra, and that the National Broadband Network will add a fourth additional national network.
Optus' preferred option is to remove the USO completely and let "the market deliver services" backed up by an effective regulatory regime. However, that approach might be "challenging politically" it adds in its submission.
"Optus supports an alternate approach that phases out the current USO scheme, to be replaced by a more targeted and customer focused scheme than currently exists," the telco said.
"A reformed USO should combine elements of a market based approach with regulation that provides certain consumer guarantees to access a basic voice service."
Under that approach the National Broadband Network would be supplemented by telcos' mobile networks, with coverage gaps addressed through schemes such as the government's blackspots program.
Telstra's head of regulatory affairs, Jane van Beelen, argued today that the USO has been a "successful government policy".
"At the moment, Telstra is the only company with the capability to connect every Australian," Van Beelen wrote in a blog entry.
"That's why the Government has given us the responsibility of making the USO a reality. By using a combination of government and industry funding we make sure a phone is always in reach."
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