Vodafone statement re Productivity Commission USO draft report


Vodafone enthusiastically welcomes the Productivity Commission’s draft report into the Universal Service Obligation which has produced a damning set of findings and a practical set of recommendations.

Its report demonstrates a thorough understanding of the issues, and recommends a clear, sensible path forward to fundamentally reform the USO for the digital age.

The Commission has recognised the current USO model, which sees $300 million in taxpayer and industry funding provided to Telstra every year for its copper network and payphones, is outdated and needs to change.

The report has, for the first time, shed light on the USO arrangements, which have not placed any accountability obligations on Telstra. It is especially damning of the USO’s lack of transparency, highlighting there are no requirements for Telstra to report on the number of non-commercial phone services it provides or the costs of services supplied under the USO.

We congratulate the government on acting on this issue by tasking the Commission to undertake this inquiry. However, this report is a damning indictment of the USO model which demands immediate action. We urge the government to follow the Commission’s recommendation to immediately begin negotiations with Telstra to amend and end the standard telephone and payphone modules of the USO.



Key findings and recommendations:

“The Australian Government should phase out the existing telecommunications universal service obligation as soon as practicable” – DRAFT RECOMMENDATION 3.1, p.20

The Australian Government should immediately commence negotiations with Telstra to amend, and ultimately abolish, module B (Standard Telephone Service USO) and module C (Payphones USO) of the Telstra USO Performance Agreement (in line with draft recommendation 3.1). – DRAFT RECOMMENDATION 9.1, p.27

“In a digital age, the voice-based telecommunications USO – costed at $3 billion in net present value terms over twenty years and introduced when telecommunications consisted of basic telephones and payphones – is anachronistic and needs to change” – p.2

“The TUSO is past its use-by date” – p.6

“In placing this obligation on Telstra, the Australian Government did not demand transparency and accountability of Telstra. The basis for funding (a total of around $3 billion in net present value terms over the twenty-year contract to 2032) is unclear and disputed.” – p.7

“Increasingly, Telstra is using its payphone infrastructure to provide free WiFi to its customers in metropolitan areas” – p.8

“The lack of transparency and accountability makes the continuation of current arrangements difficult to justify from the point of view of those who contribute to its funding” – p.8

“With regards to payphones, there is a relatively strong case for immediately winding back Telstra’s contractual obligations. Even though Telstra does not report on the profitability of its payphones services, evidence of the demise of payphones is clear.” – p.17

“Telstra (the universal service provider) is not required to, and has advised that it does not collect information on the number of non-commercial telephone services, or on the costs of any telephone service it supplies under the TUSO. As such, the evidence base for assessing whether the TUSO is providing value for money is inadequate” – p.19

“Voice services offered to premises in the NBN fixed-line and fixed wireless footprints will be of a high quality and equivalent to the standard offered under the TUSO” – p.22

“Voice services offered to premises in the NBN satellite footprint will be of an adequate quality for most purposes” – p.22