AUTHORITY USO ESTIMATES STILL TOO HIGH

Cable & Wireless Optus today confirmed its support for the delivery of high quality telephone services to regional Australia under the Universal Service Obligation, but reiterated its concern that Telstra's ambit claims were effectively penalising the people the USO was designed to assist.

The Australian Communications Authority - in a report to the Minister on the cost of the USO - offered two possible estimates of that cost ($280 million and $460 million). The current cap of $256 million set by the Minister is much closer to the real cost of the USO, which is around $180 million.

Stephe Wilks, Director Regulatory and Public Affairs for Cable & Wireless Optus, commented "The ACA's two figures are a result of uncertainty about the impact of the Weighted Average Cost of Capital (WACC). While the arguments are complex, the key issue revolves around the risk of Telstra not being paid for the USO. If the higher figure is adopted, Telstra will effectively be paid twice - because the increase in costs will not take into account the fact that an industry fund already exists to cover Telstra's costs."

Mr Wilks added that even the lower ACA figure is higher than it should be, as it does not take into account a key report provided to it by its own consultants.

"In the report the ACA has chosen not to put any value on ubiquity. The consultants that looked at this concept for the ACA said the benefits to Telstra of being the universal service provider and accessing every home, the volume of its network, and resultant brand recognition were worth up to $130 million. This amount was simply not taken into account in the ACA report.

"The three independent consultants reporting on all aspects of the USO recommended a figure as low as $180 million if the value of ubiquity was included.

"The current USO cap of $256 million is actually higher than the real cost, which should be in the order of $180 million. However, to resolve this issue and move on, Optus believes the Minister should retain the USO cap at the current level. The Minister should then move to open tendering as quickly as possible so that competitive forces would confirm the real (lower) cost," Mr Wilks said.

For more information:
Stephen Woodhill
Phone: 02 9342 7850