T3 - WHAT THE DEBATE IS ABOUT

In response to recent reports about telecommunications services in rural and regional Australia, Paul O'Sullivan, Optus Chief Executive said: "The debate around the proposed sale of Telstra is about ensuring sustainable long term competition and access to telecommunications services for all Australians. "The debate includes how to deliver better services to rural and regional Australia and how to provide safeguards to police Telstra's behaviour after its sale. "Addressing the specifics of the rural and regional debate - Optus has long championed reforms that would strengthen the USO and create a better market environment for regional customers. "Current USO arrangements should be reformed so that Telstra's competitors be released from the requirement to pay a cash cross subsidy to Telstra. Instead, carriers would negotiate directly with Government on how their USO equivalent contribution would be used to improve competitive and innovative infrastructure investment in rural and regional Australia. "The current anachronistic arrangements merely subsidise Telstra's monopoly and suppress competition. "The Department of Communications has said that the current arrangements deter new carriers from entering the market. "A fund to support rural and regional services must be explicitly designed to encourage carriers like Optus to enter the market. "The principles for the effective distribution of monies should be that they are competitively and technologically neutral, competitively tendered and that they do not reinforce Telstra's dominance in the bush." "In respect of the wider Australian market - and despite suggestions to the contrary - regulatory improvements are necessary to stop Telstra undermining competition by unfairly leveraging market dominance and their fixed network incumbency. "It is uneconomic for competitors to duplicate large parts of Telstra's fixed line network. So to unleash the power of competition, our Government - like the Governments of other countries - require the incumbent telephone company to sell its network services to competitors. "This leads us to operational separation which we see as a necessary reform. At a minimum, Telstra should be restructured so that the access network, and core services delivered over that network, are managed by an Access Division. This would ensure negotiations between the Access Division and Telstra Retail are conducted on a genuine arms length basis and that pricing is transparent. "The management and governance of the Access Division must be adequate to ensure that there is managerial and operational independence from the rest of Telstra. "There must also be an explicit legislative barrier against the wholesale arm of Telstra discriminating against its competitors and in favour of Telstra Retail, on such dimensions as quality and availability of service, connection times and repair times." Additional background information on International experience A wide range of funding arrangements for universal service provision exist across various jurisdictions. In almost every case, the incumbent is required to be the universal service provider because the incumbent derives significant benefit from being the USP. Incumbent operators pay the total cost of the USO in the UK, Germany, Denmark, Sweden, Norway, Netherlands, Luxembourg and Switzerland. Switzerland, Chile and Peru have adopted tender mechanisms to determine the designated universal service provider. France, Italy and New Zealand retain a model similar to Australia. For more information: Melissa Favero Optus Corporate Affairs Tel: (02) 9342 5030