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The government looks set to pull $253 million a year from Telstra

(Photo by Ian Waldie/Getty Images)

The federal government has outlined its response to the Regional Telecommunications Independent Review and has agreed with the report’s recommendation for a review of the Universal Services Obligation.

The USO currently sees the government pay $253 million to Telstra each year as the fixed line phone service provider of last resort, with the funds going to the maintenance and installation of fixed-line services. This is increasingly obsolete due with saturation use of mobile phones and the NBN as a fixed internet provider.

In the government’s response it identified the USO as a major issue for regional areas.

“The current consumer safeguard regime is increasingly outdated, given the evolution of the telecommunications markets, including the rollout of the NBN,” the response from the Department of Communications says.

“Current concepts and interventions reflect a fixed-line voice telephony environment delivered through a vertically integrated Telstra, which provides access to its wholesale networks to other carriers.”

It has been proposed that establishing a Consumer Communication Fund in place of the USO could be the answer, taking the money usually spent on Telstra’s fixed line services and splitting it between all carriers to improve regional mobile phone coverage.

A report last week from Infrastructure Australia recommended the USO funds be used on mobile services instead.

“Diverting funding to provide better mobile coverage in the regions will support greater use of new technologies that rely on smartphones. This could involve introducing a technology-neutral USO to support mobile services, in conjunction with existing programs,” the Infrastructure Australia report said.

While the government isn’t making any decisions right now about the change, it has asked the Productivity Commission to review the reports.

Vodafone, which has lobbied hard for the change, welcomed the government’s response with open arms.

“We are delighted the government has formally acknowledged the current USO arrangements need a robust and rational review,” chief strategy officer Dan Lloyd said.

“In the digital age, the USO is largely the equivalent of a horse-drawn carriage. Many elements of the USO are not only obsolete, but distort competition, restrict innovation and subsidise the incumbent player at the expense of consumers.

“USO reform could release much-needed funds for initiatives which increase competition as well as coverage, such as a larger and permanent Mobile Black Spot Programme, at no additional cost to the taxpayer,” he said.

If the recommended reforms go through, it’s hoped that the funding will make it more financially viable for other telcos such as Optus and Vodafone to enter the regional space and provide more options and competition.

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