A small country town 500km north of Sydney may have a funny name, but it illustrates an important argument about fairness. It can cost Telstra $30,000 to install a single phone line to a homestead. It is why Telstra is arguing for better funding for high-cost rural services.
USO Review – the argument for cost recovery
The town of Boggabri is representative of many country towns. Most of the community live in and around the town centre. However, some customers live up to 37km from the Telstra exchange. To connect these properties to the exchange can be very costly – and it is a cost borne predominately by Telstra shareholders.
Telstra strongly agrees with need for the Universal Service Obligation – which has bipartisan support – but the cost of fulfilling the obligation must be covered.
Quite simply, the USO is all about making sure all Australians have reasonable access to standard telephone services and payphones, no matter where they live or work.
The significant costs of this obligation are supposed to be shared fairly across the whole industry under an industry funding model. However, the true cost of the USO has never been adequately determined or recognised, so the costs can’t be fairly distributed.
In place of recognising real costs, or the actual amount it costs Telstra to provide these services, there is subsidy amount determined by the Communications Minister and then levied on industry. For the current financial year, the total industry contribution is just $145 million – of which Telstra contributes over 60 per cent.
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In other words, Telstra’s shareholders bear the cost of most of the levy and the difference between the levy and the real cost.
Telstra is arguing that a fairer system is needed to continue to provide access to telecommunication services for all Australians. Telstra’s submission outlines the value of the USO and the commitment of Telstra’s staff to providing services to Australians in the most remote and difficult locations, and restoring services after floods, fires and other natural disasters.
Telstra proposes a new approach to determining the USO cost by looking at the distribution of customers in exchange service areas to identify each and every high cost customer. Telstra is currently finalising a new costing model that incorporates high-cost access lines and a method for calculating high-cost transmission between remote exchanges.
Telstra also argues that:
- The definition of a ‘standard telephone service’ needs to be made more flexible and technology neutral
- Legislation should be changed to apply the USO to other providers which install infrastructure in new estates;
- There should be continuing focus on the USO as it applies to payphones and Remote Indigenous Communities.
Read the full report:
About Boggabri
Boggabri is a small community 500km north of Sydney on the Kamilaroi Highway in the Narrabri local government area. The district depends on agriculture and mining to support a population of less than 1000 people. It is also close to the Pillaga and Kimilaroi Nature Reserves and the Warrumbungle Mountains.It is a typical country town, and so has been used as a case study in Telstra's USO review submission to illustrate how settlement patterns impact telecommunications costs.
The majority of services that connect to the Telstra exchange building in Boggabri are from the local community that is clustered around the town centre. These are generally within a few kilometres of the exchange.
However there are other services that connect to the same Telstra exchange building via very long copper pairs. Some of the farms and homesteads connected to the Boggabri exchange are up to 37km away. The capital cost of putting in copper to services customers on long copper pairs around Boggabri is approximately $30,000 per household.
This is just an illustration of the actual costs in providing telecommunication services and the submission argues to have these costs built into future funding models of the USO.