Challenges and choices: Universal service in Australia and China

26 October 2011

Much has been written about the differences between China and Australia but far less about the similarities. Yet the two countries face similar challenges in the provision of the universal telecommunications services - challenges which provide an opportunity for co-operation and knowledge sharing.

While China’s population density of 143 people per square kilometre significantly exceeds Australia’s, much of its population, like our own, is concentrated along the densely populated east coast with significant tracts of sparsely populated inland areas. It is these areas which pose the greatest challenge in providing cost effective telecommunications services.

In Australia the Government has recently changed its approach to this challenge by establishing NBN Co and moving to a contractual model for universal service.

NBN Co was established to build the $36 billion National Broadband Network, a key "plank" of the Australian Government’s commitment to provide Australians with access to high quality broadband services, no matter where they live or work.

As the NBN will be a wholesale only network, the approach to universal service provision at the retail layer has also had to change.

Currently Telstra, the fixed-line incumbent, is required to make voice services available to all on request. However, once Telstra’s copper network is decommissioned as part of its agreement with NBN Co (assuming the ACCC approves those arrangements [1]), it will no longer be appropriate to regulate Telstra as the “carrier of last resort”. Instead the Government has decided to move to a contractual model.

The Telecommunications Universal Service Management Agency (TUSMA) is being established to contract with retail service providers to provide universal service over the NBN. TUSMA will periodically tender for the provision of these services, enabling competition to emerge. However, given the complex issues with the transition to the NBN, the initial contract will be with Telstra.

In China, the Government is aiming to ensure that all parts of the country benefit from development and technological change. The provision of universal telecommunication services is one way to achieve better outcomes in rural and remote areas. It also dovetails with an increasing tendency world wide to see access to telecommunication services as a virtual human right, given the critical role these services play in modern life and their potential to improve healthcare and education.

The May 2011 report from the Human Rights Council of the United Nations General Assembly declared access to the Internet a basic human right which enables individuals to "exercise their right to freedom of opinion and expression." [2] Several European nations, including Estonia, Finland, France, Greece and Spain, have passed domestic legislation recognising citizen’s right to access the internet and some countries have codified minimum speeds (Finland, Spain) and regulated access prices (Spain).

In China, as in Australia, there are challenges in providing universal service to citizens in rural and remote areas, irrespective of the model adopted. A key question for both countries is how to reach these areas efficiently. There are choices around selecting the right mix of technologies – fibre, copper, fixed and mobile wireless and satellite. There are also choices to be made about funding. For example, should high cost areas be explicitly subsidised by government or should the universal service provider subsidise these services with revenue obtained in lower cost areas? These questions can be contentious as they involve balancing economic efficiency and equity considerations. However, the prize for both nations, in terms of enhanced social welfare, is considerable.

An extended version of this article will appear in the December edition of the Communications Law Bulletin.

[1] The migration of services from the Telstra network to the NBN form part of a structural separation undertaking currently being considered by the ACCC.
[2] Report of the Special Rapporteur on the promotion and protection of the right to freedom of opinion and expression, Frank La Rue (Download PDF).

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