Report Overview

The Government and the Telco industry (via an industry levy) spend A$297mn on the USO every year. This includes fixed voice services and payphone services to everyone in Australia.

 While there have been no major changes to the structure of the USO in past 20 years, the market has undergone significant transformation: 1) Increase in competition, 2) Improvements in network technology, 3) Ubiquity of mobile coverage, 4) The NBN rollout and, 5) Mobile has overtaken fixed for voice.

In April 2016, the Government asked the Productivity Commission to examine the role of the USO. The key finding was the USO is no longer needed as for more than 99% of the premises, a combination of mobile coverage and NBN is likely to meet or exceed the standards for universal service.

In December 2017, the Government announced the Universal Service Guarantee (USG) which will provide a market based mechanism for universal access to voice and broadband services and will replace the USO once the NBN rollout is complete in 2020.

 The changes will impact both Telstra and the NBN. Telstra will lose a lucrative contract that guarantees A$297mn p.a. until 2032 while the NBN could see its costs and rollout schedule affected. The Government announcement provides no detail on how it will rework the current Telstra contract and the impact on the NBN.