The Universal Service Obligation: History and future

Published: 11th December 2023

Before we can get to where we are heading – it’s important to remember how we got to where we are currently.

Invention of Telecom and the mobile phone

The history of telecommunications in Australia is an interesting journey; one that includes the ads for the Overseas Trunk Dialling that were very heavy on Barbara Streisand singing “The Way We Were”.

Above: A whole generation of Australians have these ads imprinted on their psyche forever.

In 1901 as a result of Australian Federation, Australia's telecommunications services were controlled by the Postmaster-General's Department (PMG).  

This arrangement continued essentially until 1975, when separate bodies were created to replace the PMG.

Responsibility for postal services was transferred to the Australian Postal Commission (Australia Post) and the Australian Telecommunications Commission (ATC) – trading as Telecom Australia – ran domestic telecommunication services. 

OTC ceased operating as a separate company when it merged with Telecom Australia to form the Australian and Overseas Telecommunications Corporation in 1992. 

In the 1981, Telecom launched the country's first mobile network and the mobile phone hit the streets of Australia’s hip and wealthy. They were mainly in cars and in 1983, the first commercial 'handheld' mobile phone was introduced, which was only just heavier than a standard-sized besser brick. No one skipped arm day in the '80s.

Above: The short doco Ringing True: The first 100 Years of the PMG and Telecom Australia

The very first 1G phone was introduced in Australia by Telecom (as Telstra was known back then) in 1987, retailing at a massive $4,250.

The first “smart phone” didn’t enter the market until 1996. 

Privatisation of Telstra

In the '90s the Government decided that selling Telstra might be a good idea. This was in vogue in the '90s, with the Government privatising the Commonwealth Bank, QANTAS and the Commonwealth Serum Laboratories. (Never heard of the latter? It was producing vaccines before any of us were worried about pandemics. It was formed in 1916 and sold by the Federal Government in the '90s. It recently made 50 million doses of the COVID-19 vaccine under contract to the Federal Government... maybe we should have kept that one.) 

The Telstra (Dilution of Public Ownership) Bill 1996 was introduced to start the process of Telstra being sold, with caveats in the legislation on how much of the company could be individually owned and how much of that ownership could be in foreign hands. 

On the 21 May 1996, the Senate resolved that the Telstra (Dilution of Public Ownership) Bill 1996 be referred to the Environment, Recreation, Communications and the Arts References Committee for inquiry and report by 22 August 1996, finding:


     Consideration of the Telstra (Dilution of Public Ownership) Bill 1996 

     This inquiry has found that there is no substantial empirical evidence to back up the Coalition Government's claim that the Australian economy and Australian consumers will benefit from the partial sale of Telstra. 


     The Committee recommends Telstra remain in full public ownership. 


     The Committee recommends Telstra be retained in full public ownership to ensure that it may continue the nation building role which it has fulfilled to date, not only in the delivery of services but in the stimulus its presence as an employer has given to regional economic development. 

As part of this plan, the Universal Service Obligation (USO) was created. The USO provides funding of cross subsidies for the provision of a standard telephone service to the people of Australia. 

At the time, Australians voiced their concerns that guaranteed services under the USO – access to untimed local calls, 24-hour access to the telephone network, emergency number, operator assistance, and unique numbers – would diminish if Telstra was privatised.  

Consumers also raised concerns on broader issues of consumer protection and fear the emergence of a 'profits before service' culture. These concerns became codified into the Customer Service Guarantee (CSG). The CSG has been updated several times over the years. 

Beginning in 1997 and finalising in 2011, the Federal Government began to privatise the corporation. 

The first three stages were initiated by the Liberal–National Coalition's Howard Government.

The first, informally known as 'T1', occurred in 1997. 'T2' followed in 1999; 'T3' in 2006. 

The 17 per cent remainder of Telstra was placed in Australia's Future Fund, a sovereign wealth fund established to meet future obligations for payment of superannuation to retired federal public servants.

Text Box

In 2009, the Future Fund sold off another $2.4 billion worth of shares, reducing the Government's stake in Telstra to 10.9 per cent. 

In August 2011, under Labor's Gillard Government, the Future Fund sold its remaining "above market weight" Telstra shares, reducing its holding to 0.8 per cent of the shares, effectively completing Telstra's privatisation. 

The Universal Service Obligation (USO) and Universal Service Guarantee (USG)  

The USO is a long-standing consumer protection that ensures everyone has access to landline telephones and payphones regardless of where they live or work. 

As the national carrier, Telstra is responsible for delivering the USO, the main feature being the obligation to provide Standard Telephone Services (STS) to everyone in Australia and access to payphones. This is both a legislative and contractual obligation. 

A USO STS includes the following features: 

  • Access to local, national and international calls 
  • Untimed local calls 
  • 24-hour free access to emergency service numbers 
  • Priority assistance (for those with a life threatening medical condition)  
  • Customer Service Guarantee (acceptable connection and repair timeframes) 
  • A unique telephone number with or without a directory listing 
  • Preselection (which allows the user to preselect another provider for long distance, fixed to mobile and international calls where the STS is provided over our copper network) 
  • Calling line identification 
  • Operator and directory assistance and
  • Itemised billing. 

In 2017 the Productivity Commission published an inquiry report into the Telecommunications Universal Service Obligation (TUSO). The report recommended taking a new and modern approach to the subsidy and support arrangements that form the current universal telecommunications services in Australia. It stated:

“In a digital age, the voice-based Telecommunications Universal Service Obligation (TUSO) – worth $3 billion over 20 years (net present value) and consisting of basic telephone and payphone services – is anachronistic and costly. It should be wound up by 2020.” 

“For the vast majority (more than 99 per cent) of premises, the combination of the NBN and mobile networks is likely to meet or exceed minimum standards for universal service delivery. As such, the TUSO is no longer needed.“ 

In December 2018, the Government announced the USO would be incorporated into a new, wider Universal Service Guarantee (USG), that included access to both broadband and voice services. 

Mobile services are provided commercially and not included in the USG. The current commercial mobile services reach 99.4 per cent of the population and cover around 31 per cent of our landmass. 

Where to next? 

The Albanese Government has begun broad consultation with industry and the community on the delivery of a modern and more fit-for-purpose USO in light of available technologies and consumer preferences over recent years. 

A future USO will need to meet the following requirements:  

  • Broadband services are available to 100 per cent of Australian premises, on request, at the completion of the NBN rollout in 2020
  • Voice services are available to 100 per cent of Australian premises on request  
  • Any proposed new service delivery arrangements are more cost effective than the existing USO contract (including any transitional costs) and,
  • A new consumer safeguards framework is in place following a review and associated public consultation process.  

No change will be made to the existing USO until these requirements are met. 

The Government currently contracts with Telstra to provide the USO until 2032. As new arrangements are developed for the USG, the Government will engage with Telstra regarding the provision of the existing USO services. 

The USO features in a number of motions from LGAQ annual conferences, especially in regards to services provided in rural and remote areas. 

The LGAQ will be responding to the call for submissions on this topic and has contacted the Universal Services section of the Department of Infrastructure, Transport, Regional Development, Communications and the Arts to organise a consultation with members early next year, before the closing date of Friday 1 March 2024.

Consultation documents are available here.