Are STD rates being milked?

The Federal Government's universal service obligation is designed to ensure all Australians have access to standard telephone services and payphones.

For country people, the USO ensures everyone can receive a basic telephone service installed at a reasonable cost.

Without the USO, the cost of installing a phone line would be way beyond the realms of possibility for most rural and remote Australians.

At the moment the USO is paid for by the telephone companies, in proportion to their market share across urban and rural Australia.

Each company's contribution is put into the USO funding pool, which is then used by Telstra to maintain and connect rural and remote networks.

But there's a problem.

To start with, the last time the regulator calculated the cost of providing the USO, it came up with $550 million.  That was in 1997.

Back then petrol cost 73 cents a litre and wages were 30 per cent lower than now.

Yet for next year the Government has set the cost of the USO at $157 million.

This is bizarre, because in 2007 installation and maintenance costs to provide telecommunications services to remote users are sure to be higher than a decade ago.

On the Government regulator's own figures, there will be at least a $400 million shortfall on the USO next year.

That's the difference between what the USO costs to provide and what is collected from phone companies.

That means Telstra has to find the shortfall.

Services to rural Australia are still being delivered by Telstra because this is a condition of its licence, even though it is not fully funded to do so.

Someone must be paying the difference between what the Government sets as the figure telecommunications companies pay for the USO and what it actually costs.

The most likely group is the very one set up to benefit from the USO -- rural and remote Australians.

Would we be surprised if rural, regional and remote telephone users are paying higher STD call charges to cover the shortfall in USO funding?

There are three groups of phone users that could be bearing the cost of paying for the USO shortfall -- city consumers, business, or country consumers.

It is unlikely that Telstra is able to extract the shortfall from its business markets, which are highly competitive.

The same applies to Telstra's residential market in major cities.

By contrast, although there is significant competition in rural areas, (we all suffer from those dreadful telemarketing calls on bad lines from phone companies nobody has ever heard of), by international standards STD and mobile phone charges remain high for many country users.

There is no way of proving whether the reason we have so many STD areas and such high STD costs is to make up for the shortfall in USO funding.

After all, in the US it costs as little as two cents a minute to make a call from one side of the country to the other.  But the lowest price in Australia is many times that amount, unless the service is bundled with other products.

And it is not as if distance is any longer the reason for higher charges.

In Queensland, business and government customers can sign up for a flat rate of 10 cents a call to anywhere in the state.

Similarly, the distance from one side of Melbourne to the other is much further than across most STD zones in country Victoria.  Yet all Melburnians enjoy local calls to the other 3.5 million in their city.

The remaining 1.3 million Victorians, living in country areas, must pay STD rates, sometimes just to the next town.

A great deal more transparency is needed to ensure that the figure the Government sets as the cost of the USO is as close as possible to its real cost.

Then all of us, country people, phone companies, the Government and urban people, can have an informed conversation about how much we value everybody in this nation having access to telecommunications.

Only then can country people be sure that they are not subsidising the connection and maintenance of new rural and remote customers by paying higher STD charges than necessary.