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Debate is erupting over the future of the universal service obligation (USO), which guarantees landline phone access to regional Australians, with the federal government labelling current arrangements as no longer fit for purpose and Optus saying they are a waste of money.

The government on Monday opened consultation with the telecommunications industry over the future of the USO, being delivered by Telstra, which receives billions in funding from the government and rivals including Optus and TPG to keep regional Australians connected.

Communications Minister Michelle Rowland says the USO must encompass new and emerging technologies.Credit: Alex Ellinghausen

Telstra could lose its USO responsibilities, however, with its rivals arguing the $200 million it receives annually could be better spent on more modern communications technologies, and the Nationals calling for the government to potentially award the contract elsewhere.

A discussion paper released on Friday noted that the NBN is now available to 97 per cent of Australia’s population, while mobile coverage is available to 99.6 per cent. Satellite technologies like those provided by Elon Musk’s SpaceX are now also widely available in remote locations.

“As far back as 2015, I said the USO needs to respond to changes brought on by the roll-out of the NBN,” Communications Minister Michelle Rowland said.

“While the USO is here to stay, our government wants to ensure it is fit for purpose and encompasses new and emerging technologies like quality fibre connections and satellite services.

“This new consultation process will allow industry and the community to have their say on how phone services are delivered in Australia, with a particular emphasis on rural and regional, and First Nations communities.

“The government has not yet made any decisions on how to modernise the USO, and will be guided by the feedback we receive as part of this important consultation.”

Optus executive Andrew Sheridan said that the current arrangements are a “throwback to the analogue age” and deliver poor outcomes for remote communities at a high cost. The USO was devised nearly two decades ago when most people relied on a home phone, he said.

Sheridan said the only beneficiary from the current deal is Telstra, which he said receives over $200 million per year in net funding from industry and government with no accountability over its effectiveness.

A Telstra spokesman said the telco would welcome changes to modernise the USO, and has spent several years calling for changes.Credit: Penny Stephens

“Since the Universal Service Obligation began, Optus has paid Telstra around $1.4 billion to support Telstra’s delivery of the universal service – this money could have been used to build over 1500 more mobile towers across regional Australia,” he said.

“As identified by the minister, advancement in wireless and satellite technologies in recent years open the possibility of delivering better services for our most remote communities.”

A Telstra spokesman said the telco would welcome changes to modernise the USO, and has spent several years calling for changes.

“We are excited by the opportunities reforming the USO can bring, including connecting people with the latest technologies like satellite and fixed wireless,” the spokesman said.

TPG also welcomed the review. “We are hopeful it will pave the way for improvements in the delivery of services to regional Australia by removing subsidies for Telstra’s redundant copper network,” a spokesman said.

Rural Australia has become a battleground for Australia’s telcos over the past year, with the competition tribunal in June blocking a $1.8 billion regional network sharing deal between Telstra and TPG, ruling it would entrench Telstra’s dominance in the bush.

Nationals leader David Littleproud said the USO was no longer fit for purpose, given it came into effect when Telstra was privatised and the technology mix didn’t include mobiles.

“The Nationals believe in reforming the USO to extend the mobile phone network, with mandated roaming and the removal of averaging time periods for repairs,” he said.

“If Telstra can’t meet those requirements then the government should seek other companies to take up that contract.”

It comes as NBN prices are set to rise for millions of Australians in coming weeks, with retailers including Telstra, Optus and Aussie Broadband all lifting prices of their lowest speed plans.

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