This audit would assess the effectiveness of the Department of Communications and the Arts’ (the department’s) management of the universal service obligation (USO) contract, specifically:

  • its response to Auditor-General Report No. 12 of 2017–18, Management of the Contract for Telephone Universal Service Obligations; and
  • its broader development of policy options for USO reform.

Under the 2012–2032 USO contract, Telstra receives a fixed $297 million per year to provide Australians with reasonable access to telephone and payphone services on an equitable basis. Both the Auditor-General’s report and a 2017 Productivity Commission report raised questions over whether the contract represented ongoing value for money. The Auditor-General’s report made two recommendations to support the department’s ability to achieve value for money from the contract, including in relation to contract management.

A policy review undertaken by the department in 2017–18 recommended the retention of the USO contract at least for the medium term, a position accepted and announced by the Australian Government in December 2018. The report from the policy review also stated that the department would adopt a ‘sustained focus on continuing improvement management of the USO contract’.

In addition to increased engagement with Telstra as the contractor and with the Australian Communications and Media Authority as the industry regulator, the department has commenced a review into Telstra’s performance in reporting to the department under the USO contract.