Mr Cobb asked the Minister representing the Minister for Communications and the Arts, upon notice, on 30 October 1996:

(1) Has the Minister's attention been drawn to the table in appendix 8 of the report by the Senate Environment, Recreation, Communications and the Arts References Committee of its inquiry into the Telstra (Dilution of Public Ownership) Bill 1996 which details the cross subsidy in each electorate.

(2) Does the Minister endorse the figures quoted in the table; if not, will the Minister provide alternative figures.

(3) Is the Minister able to (a) say how the cross subsidy figures were calculated and (b) provide similarly derived figures for each major centre in the electoral division of Parkes.

(4) What guarantees are there that the rural cross subsidy will remain in place after the partial sale of Telstra.

Mr Warwick Smith —The Minister for Communications and the Arts has provided the following answer to the honourable member's question:

(1) I am aware of the table shown at appendix 8 of the report of the inquiry into the Telstra (Dilution of Public Ownership) Bill 1996.

(2) As the designated Universal Service Carrier, Telstra's Universal Service Obligation (USO) requires the company to ensure that the standard telephone service and payphones are reasonably accessible to all Australians on an equitable basis, wherever they live or carry on business. AUSTEL is responsible for administering the USO arrangements and is also required to monitor and report to the Minister regarding Telstra's performance in meeting the USO. I am advised that Telstra funds its share of the costs incurred in providing loss making services under the USO from elsewhere in its business—that is, through cross subsidies.

Under the Telecommunications (Universal Service Levy) Act 1991, Telstra, Optus and Vodafone have been declared participating telecommunications carriers. This means they are required to share the costs of meeting the USO based on their share of timed telecommunications traffic. AUSTEL is responsible for assessing the contributions of each carrier. Under the Telecommunications Act 1991, AUSTEL is responsible for assessing and publishing the total Net Universal Service Cost (NUSC) incurred by Telstra, each financial year, in providing the USO in loss making areas (which may be smaller than the area serviced by the associated exchange). The Act stipulates that AUSTEL use an `avoidable cost' methodology which estimates costs avoided and revenues foregone if a particular group of customers in an area declared a net cost area were not serviced.

I understand that the figures included at appendix 8 of the Senate report were estimated by Telstra using a model Telstra has used in the past to estimate its NUSC, to apportion the NUSC assessed by AUSTEL for 1994/95, across electorates. AUSTEL and the three carriers have agreed that Telstra's model needs to be revised. They are currently working to establish a new model.

AUSTEL has advised that these figures are not consistent with the NUSC which it assessed for 1994-95 (see Telstra's explanation against (3)). AUSTEL's NUSC assessments are the only official figures available and have not been published in a disaggregated form since 1992/93, and then only to the State level.

(3) (a)-(b)

Telstra has advised that the cross subsidy figures provided at appendix 8 of the Senate report were calculated by apportioning AUSTEL's NUSC assessment according to the exchange losses generated by Telstra's model. Telstra has advised that these estimates were derived by overlaying electorate boundaries on exchange boundaries to estimate the losses generated by exchange in an electorate, using the geographical centre of each exchange as a reference point. This involved a significant amount of estimation as exchange boundaries do not necessarily coincide with State or electorate boundaries; each electorate is serviced by a number of exchanges; and an exchange may service a number of electorates. Telstra has indicated that care should be used when interpreting the cross subsidy estimates included in appendix 8 of the Senate's report. Telstra's model is based on a number of assumptions currently under review and further disaggregation of AUSTEL's NUSC Assessment using the model would further reduce the reliability of any resultant estimates. Accordingly, producing data at the level of disaggregation that you have requested—namely for each major centre in the electoral division of Parkes—would not be a worthwhile exercise as the reliability of the figures would be open to serious question.

(4) Telstra's Universal Service Obligation will not be affected by its partial privatisation. The Government has reaffirmed in the Telstra (Dilution of Public Ownership) Act 1996 and in the Telecommunications Bill 1996, Volume 1, its commitment to the key consumer safeguard of the provision of a universal service to ensure that all Australians will continue to have reasonable access, on an equitable basis, to the standard telephone service and payphone services. Indeed, the Government is currently conducting a review of the definition of the standard telephone service to see whether it should be upgraded to accommodate new technologies.