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The Universal Service Obligation cost



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M e d i a R e l e a s e

AVSTRAI.I X , ' - ί ίί « - - *

S E N A T O R T H E H O N R I C H A R D A L S T O N

Minister for Communications, the Information Economy and the Arts Deputy Leader of the Government in the Senate

THE UNIVERSAL SERVICE OBLIGATION COST

The Minister for Communications, Senator Richard Alston, today announced that the Government will seek to reach agreement with all telecommunications carriers to cap the universal service obligation (USO) cost at $253.32 million for the 1997/98 year. Failing such agreement, the Government will legislate to cap the USO cost for the 1997/98 year at that level.

"The Government is taking decisive action at this time in order to provide the industry with the necessary degree of certainty while the Australian Communications Authority (ACA) continues its work in calculating the most appropriate figure for the USO cost using the methodology it has developed in conjunction with the carriers over the last two years.’ Senator Alston said.

'The AC A will also be required to report to the Government on the implications of such a figure for competition in the industry, and the most appropriate methodology for calculating the USO cost in the future.

'Upon receipt of the ACA report, the Government will then be in a position to determine the most appropriate means of calculating future USO contributions. In reaching a final decision, it will of course be open to the Government to seek independent advice.’

Under the Telecommunications Act 1997, all licensed carriers contribute to the losses incurred by Telstra in carrying out its role as the 'national universal service provider’. The ACA has responsibility for assessing cost claims by Telstra and determining the levy payments to be made by other carriers.

However, for the last three years, Telstra, Optus and Vodafone have agreed on a process under which the USO cost was agreed to be in the order of $250 million per year. These three carriers, which were the only licensed carriers prior to the commencement of the Telecommunications Act 1997, have also been working for some time on a 'model’ to calculate the USO cost into the future.

Telstra recently lodged a $1.8 billion USO cost claim with the ACA, based on a range of assumptions about financial variables including asset values and the cost of capital, many of which will need to be subjected to close scrutiny by the ACA.

Media contacts: Terry O’Connor, Minister’s office 02 6277 7480 or 0419 636 879 ______________ Website: www.richardalston.dca.gov.au 187/98 12 October 1998