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Wednesday, 8 February 2012
Page: 224


Mr HARTSUYKER (Cowper) (10:56): I rise to speak on the Telecommunications Universal Service Management Agency Bill 2011 and related bills. The universal service obligation is a vital aspect of Australian telecommunications. Every Australian needs and deserves access to basic telephone services at a reasonable price. The USO guarantees that these services will always be available. It is important to note at the outset that these bills do not implement or amend the USO. Rather, these bills implement part of the government's backroom deal with Telstra to create the NBN.

The USO primarily benefits residents in regional and remote Australia. For these residents, access to a basic phone service is vital because other communications options are often not available or affordable. In rural and remote areas the provision of basic phone services is often not economically viable, so a subsidy is needed to ensure telephone services are accessible and affordable. The coalition strongly support the USO and we recognise the vital role the USO system plays in keeping regional Australia connected. The USO also provides a subsidy to ensure that payphones continue to be available. Although pay phone use is decreasing, the USO for payphones is vital in regional and remote towns, particularly where mobile coverage is patchy or nonexistent. In metropolitan areas, payphones may seem largely unnecessary, but the experience in country electorates has been that rural communities value the security and certainty offered by the availability of a payphone.

As the government's National Broadband Network is implemented and Telstra moves towards structural separation, there is a need to reform the USO system. Telstra has historically been a vertically integrated operator of Australia's fixed line phone network. As a result, Telstra has been subject to a regulated obligation to ensure that all Australians have access to a standard phone service. As the NBN rolls out and Telstra's copper network is gradually decommissioned in NBN fibre areas, Telstra will transition to effectively become just a retailer competing with other telecommunications retailers. The general thrust of the government's changes to the USO appears to be reasonable, moving from a regulatory system to a contractual system that will eventually be open to competition and should provide benefits to consumers in the long term. However, as with most policies of our current government, the devil is in the detail. While the USO will technically be open to competition, the government has signed long-term contracts with Telstra to deliver the USO as part of its backroom deal to prop up the NBN. These contracts are not publicly available. We simply must take the government's word for it that the contracts offer value for money to both taxpayers and telecommunications users. After watching this Labor government in action over the past four years, I have no confidence that the government has got this right. I will have more to say on that shortly.

Now I will turn my attention to the details of the bills before the House. There are three bills before the House today. The first of these, the Telecommunications Universal Service Management Agency Bill 2011, provides the framework for the new USO system. The bill will create a new statutory authority, the Telecommunications Universal Service Management Agency, to be known as TUSMA. TUSMA will be responsible for entering into contracts on behalf of the Commonwealth for the delivery of public interest telecommunications services. This includes standard telephone services, payphones, the emergency call system and the National Relay Service. TUSMA will also be responsible for ensuring that voice-only customers are migrated onto the NBN fibre before Telstra's copper network is decommissioned. TUSMA will also be required to support research and development aimed at ensuring public interest services, such as traffic lights and public alarm systems, can migrate onto the NBN with minimal disruption.

Part 2 of the bill sets out the scope of grants and contracts to be administered by TUSMA and provides the minister, subject to the scrutiny of parliament, with the ability to set standards and benchmarks that will apply to contracts and grants managed by TUSMA. The agency will monitor the performance and compliance of contractors and grant recipients and maintain a register of all contracts and grants.

Part 3 sets out TUSMA's corporate structure, accountability and reporting requirements. TUSMA will be a statutory agency under the Financial Management and Accountability Act 1997. The minister will appoint a chair and between four and six board members. In appointing TUSMA members, the minister is required to select candidates with a diverse range of skills and expertise. The remuneration for the chair and members will be set by the Remuneration Tribunal. TUSMA will also have a CEO and staff who will be employed under the Public Service Act.

Part 3 also provides for TUSMA to maintain registers of public interest telecommunications grants and contracts. These registers will need to include details for each contractor and grant recipient, contract duration, costs and the services each contractor or recipient is expected to deliver. These registers must be publicly available on the agency's website. TUSMA will also be required to provide a report to the minister every year detailing how contractors and grant recipients have performed. This report will be published in TUSMA's annual report to parliament. The bill also provides for a review of the USO arrangements before 1 January 2018.

Parts 5 and 6 of the bill set out the funding arrangements for TUSMA. Currently the USO for standard phone services and payphones is funded by a revenue based industry levy. The National Relay Service is currently funded by a similar levy. Under the new arrangements, TUSMA will receive government funding with residual funding requirements to be met by a consolidated industry levy.

The government has agreed to pay Telstra $230 million per year to provide standard phone services and $40 million per year for payphones. These amounts will not be adjusted for inflation, but these amounts may be revised up or down as a result of changes to government policy. Telstra will be paid up to $20 million per year for the emergency call service. As part of the government's agreement with Telstra, the emergency call service will be put to tender within five years. If no tenders are received or none of the tenders are acceptable to TUSMA, Telstra will continue to be the emergency call service provider.

The National Relay Service contracts currently cost around $17 million per year. These contracts with WestWood Spice and the Australian Communication Exchange are due to be retendered in 2013. The government estimates that TUSMA will also spend about $15 million per year on migrating voice-only customers onto the NBN and $20 million over two years on developing solutions for the migration of public interest services onto the NBN.

This takes the total expected liability for TUSMA to around $340 million per year, reducing to $330 million after two years, including a component to cover the agency's administrative expenses. This is a significant increase in the cost of delivering the USO. By way of comparison, Telstra received a subsidy of around $145 million to deliver standard phone services and payphones in 2010-11. The cost to provide the USO has long been a contentious issue in the telecommunications industry, with Telstra claiming its cost to provide the USO exceeds the subsidy it receives. But, on the other hand, other carriers claim Telstra is paid too much to deliver USO services.

The government commissioned a report by telecommunications consultant Paul Paterson, who concluded that the net cost to provide the USO for standard telephone services is between $215 million and $262 million per annum, and the net cost to provide the USO for payphones is $35 million to $48 million per annum. The payments to Telstra are in the lower half of these ranges.

This increase in the subsidy provided to Telstra and the government's policy decision to expand the scope of services to be funded by the industry levy mean that telecommunications carriers will be asked to pay a significantly increased levy. In order to give the industry time to adjust to the increased levy, the government has promised to cap the levy on carriers for the first two years so that the overall liability of carriers other than Telstra does not increase. Individual carriers may still pay slightly more or less as their share of industry revenue changes, but the carriers' collective levy will be capped. For this period, the government will provide additional funding to cover the shortfall in the levy collected due to the levy cap. After the initial two-year period, the government has committed to provide $100 million per year towards TUSMA's operations, with residual funding needs to be met entirely from the industry levy.

The second bill before the House is the Telecommunications Legislation Amendment (Universal Service Reform) Bill 2011. The primary purpose of this bill is to make consequential amendments to telecommunications legislation and other legislation related to the introduction of the TUSMA Bill. This bill contains amendments to the consumer protection act which would allow the minister to progressively remove the current USO regulations for standard telephone services and payphones if specified conditions are met and appropriate contractual arrangements are in place. Proposed section 8J sets out the process by which the minister can remove the USO regulations. Before the minister can remove the regulations, a contract to provide the USO must be in place, the minister must be satisfied that Telstra is complying with the contract and the minister must obtain advice from ACMA and TUSMA.

Similar obligations apply to the removal of the payphone regulations, as detailed in proposed section 8K. The minister must wait at least 18 months from the commencement of this section before making a declaration under this section. In effect, there will be two USO systems in place for at least the first 18 months after the NBN is rolled out in a particular area. The final bill before the house is the Telecommunications (Industry Levy) Bill 2011. The bill is the procedural mechanism by which the levy is imposed on telecommunications carriers to support the operation of TUSMA. The new levy on telecommunications carriers will replace the USO and NRS levies. ACMA will be responsible for collecting the levy and assessing the levy amount, as is currently the case.

I want to turn my attention to matters of concern with regard to the TUSMA proposal. The general concept of transitioning the USO away from the traditional regulatory basis is a natural outcome of the government's development of the NBN. However, I find it ironic that the government has only chosen to develop a more competitive USO model because it is building the NBN—the biggest government owned monopoly that Australia has ever seen.

The government loves bureaucracy. If there is a simple way to do something and a complicated and expensive way to do something, this government always picks the complicated and expensive way. At present, ACMA oversees the USO and collects the USO levy. This system has worked reasonably well for a number of years. Instead of utilising the existing capacity within the existing agency, the government has seen fit to create a new bureaucracy with a new platoon of public servants. The new agency will have little incentive to keep expenses down, particularly as the government funding for TUSMA is fixed and any increase in cost will be borne by the telecommunications industry.

To provide incentive for the government to keep TUSMA's administrative costs in check, I have circulated an amendment, which I will move at the consideration in detail stage, which will require ACMA's budget for any given year to be reduced by an amount equivalent to the administrative budget of TUSMA. This amendment is intended to ensure that TUSMA's costs are not duplicated within ACMA. Any increase in TUSMA's costs will flow through to the industry levy and ultimately to the telecommunications consumers. As a result, it is appropriate to ensure that TUSMA is efficient and streamlined.

The coalition is also committed to ensuring that Australians in regional areas will continue to have access to standard telephone services. To that end, I have circulated an amendment to require the minister to obtain a favourable independent review of the quality of standard telephone services before being permitted to roll back the USO regulations. This provision will ensure that an independent expert certifies that the standard telephone services are of sufficient quality to justify rolling back the USO obligation. This amendment will add an additional safety net within the Telecommunications (Consumer Protection and Service Standards) Act 1999 to ensure that the USO regulations are not rolled back too soon.

The coalition also has concerns about the scope of TUSMA's responsibility to expand without reasonable basis. The government has indicated that TUSMA's budget funding will be set at $100 million per year. The residual requirement will be funded by the industry levy. This creates an incentive for the government to shift further responsibilities on to TUSMA under the guise of public interest telecommunications services while shifting the cost away from the government's budget on to industry and ultimately on to consumers. The opposition will carefully scrutinise every move the government makes in this regard. The Senate environment and communications committee has taken submissions on the bills and heard evidence at a public hearing last week. The coalition will wait for the outcome of this Senate inquiry before deciding whether further amendments may be appropriate to ensure that taxpayers and consumers are protected through the transition of USO services to a contractual basis.

It is also important to consider these bills in their context. These bills would not be before the House if the government was not building the most anti-competitive, expensive, ill-conceived white elephant in Australia's history. The TUSMA system was created as part of the government's backroom deal with Telstra to prop up the NBN. As a result, we really do not know what services Telstra will actually be delivering for the $270 million payment. We do not know what conditions have been placed on Telstra in its contracts with the government. We do not know if the contracts represent fair value for money. We do not know whether consumers are getting a raw deal from this agreement.

What we do know is that this government cannot be trusted to prudently manage public funds. We know that the NBN was not the subject of a cost-benefit analysis. We know that the telecommunications industry will be subject to increased levies, which will flow through to consumers. We know that the government is embarrassed to reveal the true cost of the NBN.

Every time the NBN committee asks NBN Co. or the minister for information about the network rollout, the information that is eventually released provides little insight into the status of the project or is presented in a form that does not allow the project to be appropriately scrutinised. From the little information that has found its way into the public domain, we know that the NBN is struggling with low take-up rates. The Australian reported last year that the take-up rates in Armidale in NSW were as low as two per cent at one stage. This is despite a lavish $138,000 launch.

We know that the NBN project is already behind schedule, with key agreements yet to receive approval from the ACCC. We also know that the ACCC still has significant concerns about Telstra's structural separation undertaking, which is a key component of the NBN deal. We also know that NBN Co. abandoned the construction tender process—on April Fools' Day last year—because none of the 14 tenders was acceptable to the government. We just do not know what the replacement contract with Silcar means with regard to taxpayers. I will conclude now and I look forward to speaking further on this bill at the consideration in detail stage.