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Universal service cap legislation.

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Stephen Smith MP

Member for Perth

Shadow Minister for Communications


Wednesday 26 May 1999





The Opposition supports the Government’s legislation, being debated in the Senate today, which caps the c ost of the Universal Service Obligation (USO) at $253.32 million for the 1997/98 financial year, as compared with Telstra’s recent cost recovery claim of over $1.8 billion for that financial year.


Shadow Minister for Communications, Stephen Smith, said the Opposition supported the legislation because Labor believed bipartisan support for the legislation was important to ensure certainty in Australia’s telecommunications industry and certainty for the operation of the USO.


“The legislation also provides for the Minister for Communications, subject to Parliamentary disallowance, to cap the cost of the USO for the 1998/99 and 1999/2000 financial years if required as a measure of absolute last resort”, Mr Smith said.


Media Contact: Patrick Bindon (02) 6277 4108 or 0415 694 878


Briefing note on capping the USO


The recovered cost of providing the (USO is shared by Telstra (the current designated Universal Service Provider) and its various competitors in accordance with their market share, with roughly 85% of the total cost being carried by Telstra. In other words, the practical effect of the legislation is to cap the amount Telstra can effectively charge the other carriers for the 1997/98 financial year.


Telstra’s competitors strongly oppose Telstra's $1.8 billion claim and support the cap measure.


$253.32 million, the proposed 1997/98 cap limit, is the 1996/97 Universal Service Obligation cost plus CPI


In the interim, the Australian Communications Authority is currently assessing the 1997 98 claim by Telstra. In addition, the ACA has been asked by the Government to review USO cost methodology generally in order to address this issue for future years.



dd  1999-05-27  11:26