Keeping copper will gold-plate USO: Optus

Optus has called for the government to abandon plans to maintain Telstra's copper network to uphold the universal service obligation in areas where the National Broadband Network (NBN) will be delivered via wireless or satellite.

In July, the Department of Broadband, Communications and the Digital Economy released a discussion paper (PDF) calling for industry comment on proposed legislative reform that the government intends to implement affecting the future of the universal service obligation of telephone services. Reform is needed because of the $11 billion agreement between NBN Co and Telstra, which will see the telco decommission its copper and hybrid fibre-coaxial (HFC) networks and migrate customers onto the NBN. One of the key components of the agreement is the telco releasing responsibility for the USO to a new government entity known as TUSMA (Telecommunications Universal Service Management Agency). Telstra, however, will be required to keep its copper network active in the 7 per cent of Australia that is not covered in the NBN footprint, simply to provide voice services in those areas.

In its submission (PDF) to the paper, Optus said that it was unclear why the copper network needed to be kept, stating that the fixed-wireless and satellite networks would be sufficient enough to deliver voice services in those areas.

"We previously cautioned that such a proposal has the potential to lead to significant inefficiency in the delivery of the USO because it fails to recognise the central economic reasoning that underpins the government's own NBN policy: that fixed telecommunications services can be delivered most efficiently over a single wholesale-only network," Optus said. "Instead, it opts for the inefficient duplication of network infrastructure, for reasons that have not been adequately explained."

Ongoing maintenance costs for keeping the copper network active would lead to a USO "cost blowout", Optus warned, because while the number of customers on the network would decline, the maintenance costs would remain the same. Optus said this cost would then be passed on by Telstra to other telcos as part of their USO payments, and would then ultimately be passed onto consumers.

At the same time, Optus argued that being the USO provider didn't currently impose any burden on Telstra at all, as an incumbent operator, and the telco should not be subsidised by its rivals for providing the service. The payment system was "inappropriate" and had a negative impact on competition in the industry, it said.

Macquarie Telecom agreed to this point, saying in its submission (PDF) that Telstra should bear the costs of USO alone.

"In effect, competitive carriers are required to make payments to Telstra for the mere 'privilege' of competing with Telstra. As such, the USO levy payment is effectively a tax on competition which discourages sector participation and investment," it said.