Conroy reveals mysterious Telstra “subsidies”


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.

Image credit: Kim Davies, Creative Commons


  1. Well there is nothing mysterious about the USO obligation and payments made under the Australian Broadband Guarantee the major part of which was to enable exchanges with ADSL that would not be viable as a straight up commercial business decision.

    Applying for funding was open to all ISP’s, the majority of ISP’s other than Telstra couldn’t be stuffed, the fact that Telstra received the majority of the funding was down to them being the sole applicant.

    Exchanges enabled with such funding are listed as such in the public domain on the Telstra Wholesale web site, no mystery there.

      • Yes Renai, Simon Hackett has always spoken about the need for affordable backhauling, medium to small providors are going to be stretched to backhaul to the 121 POI’s (more than 100 of which in Telstra exchanges) that might mean that the smaller providors might just have to just dedicate areas to which they deliver services to remain with a foothold in the market

        • Of course what is not mentioned is that monopoly backhaul in the absence of competitor backhaul is subject to ACCC pricing jurisdiction, and ISP’s can make submissions if they feel that backhaul pricing is too high.

          The majority don’t bother.

  2. Is Conroy talking about broadband or phone services? We already know there’s some deal in the background that will allow Telstra to provide InContact and HomeLine BUdget phone services on the NBN when the retail price will be lower than the AVC cost. Could it be that?

  3. Is Conroy talking about broadband or phone services? We already know there’s some deal in the background that will allow Telstra to provide InContact and HomeLine BUdget phone services on the NBN when the retail price will be lower than the AVC cost. Could it be that?

  4. There are also subsidies for people on various kinds of government handouts (pensions etc) that give eligible customers a discount on their phone line rental cost.

  5. Gotta find O’Sullivan’s comments about unfair competition funny given the whole GoF thing Optus is engaged in ;-)

    • Indeed, of course Optus stopped its exchange rollout in 2009 whilst others are still doing it, the prerogative of ‘taking Telstra on’ stops short when you want it to, then you can complain how dominant they are.

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