news Communications Minister Stephen Conroy yesterday reportedly revealed a mysterious set of “subsidies” being provided to Telstra to maintain services to certain broadband customers would be maintained under Labor’s National Broadband Network project — but without disclosing much in the way of details under the scheme.
“There‘s actually a subsidy in place at the moment via Telstra to a certain category of citizens that‘s below the normal rate,” Conroy said said at a conference in Canberra yesterday, according to industry newsletter Communications Day.
The comments were not reported as part of Conroy’s official speech, which is available online, but the Minister reportedly noted that the subsidies would continue and that details would be revealed “over the next month or so” as Telstra’s multi-billion dollar deal with NBN Co was put to its shareholders. It’s not clear to what extent the comments were part of wider comments made by the Minister yesterday about the nature of cross-subsidies in broadband, which see prices set in cities partly to assist with providing services to the bush.
The main subsidy which Telstra is currently paid is the Universal Service Obligation, which sees other telcos contribute towards pooled funds which assist Telstra in maintaining its infrastructure in regional areas — which other telcos use. Under the telco’s deal with NBN Co, however, Telstra will eventually no longer be required to meet most of its USO costs, with a new entity to be created, USO Co, to take over responsibility for the USO from mid-2012, with government funding.
Other government subsidies include the Australian Broadband Guarantee, which has been paid to rural customers to ensure they can get broadband.
A spokesperson for Conroy has been invited to clarify the Minister’s comments on the matter. However, the comments are understood to have caused some consternation amongst Telstra’s rivals, who are concerned the level playing field created by the NBN may wind up being a little bumpy.
Optus, for example, was already concerned about Telstra’s deal with NBN Co, despite signing its own $800 million arrangement in early July.
Over the past six months and previously, the telco’s chief executive Paul O’Sullivan has expressed his fear that Telstra would take the Government’s billions and use them to engage in a war on its competitors that would result in the telco taking the bulk of the market share to be gained from the NBN turmoil through sheer force of dollars being spent to win it.
O’Sullivan has referred to this effect as ‘market distortion’, and highlighted Telstra’s significant marketing push in the mobile sector in the second half of 2010 as a small example of what could happen as the NBN is rolled out — but on a much grander scale, with many more billions for the telco to play with.
To be honest, I’m really not sure what Conroy is talking about here, but I wouldn’t be surprised if this is a harmless bit of detail which will eventually be revealed as part of Telstra’s deal with NBN Co. There is a great deal of complexity in that deal — and I’m not sure this is anything to get alarmed about just yet.