News about a USOF Mobile Handset Scheme

It has been reported that USOF India may fund a scheme wherein mobile handsets are given to female members of poor rural households who have completed 100 days of work under India's rural employment guarantee scheme-MNREGA. Eligible beneficiaries would be identified by the state administration and handsets bundled with connectivity and m-government content such as health records and entitlements transfers would be provided by the USP chosen either through bidding or on nomination basis. Present USOF Rules would require choice of USP by bidding.

While the focus on women and m-government is welcome, I am not sure that mobile handsets are needed to be subsidized. It is the connectivity and content that USOF could focus on instead. If these are available, handsets (even second/third hand) would be purchased in any case. It is however a fact today that rural women may not own handsets. This was noticed during the implementation of USOF's Sanchar Shakti scheme. 

USOF may have to think of adequate safeguards to prevent transfer of the phone to non beneficiaries and false claims by USPs as implementing such schemes can be  administratively very challenging.

Nigeria's Universal Service Provision Fund-Lessons Learnt Way Forward & ITU's GSR 13 Discussion Paper

It has been reported that the Nigerian USPF ("which is a special fund set up by the Federal Government under the Nigerian Communications Act 2003, designed to provide telecommunications and ICT services to un-served, under-served and deprived groups and communities in the country") will under its new five year Strategic Management Plan (SMP),  build 1000 BTS per year and also lay 15,0000 kms of OFC . It will afurther create Internet POPs in 25 clusters by 2017.

The previous SMP which ended in 2011 revealed lessons that are perhaps  common across the globe. These include use of bidding for transparency, the need to "follow an  integrated approach to project strategy and execution would lead to increased participation of industry operators; ensure implementation of well-planned and adaptable projects that suits a variety of ICT schemes.." etc.

The problem with the earlier SMP include that,

“...[P]rojects were designed and defined using a ‘one size fits all’ approach, thus USP intervention, in some cases, did not directly address the specific needs of the beneficiaries, among others challenges,”  as stated by partner KPMG chief said.

I have written about this earlier as for example at http://ictsforall.blogspot.in/2013/07/usof-indias-unspent-balance-under.html.

Many of these thoughts are echoed in ITU's discussion paper on Universal Service Funds for the Global Symposium for Regulators 2013. (Please see  http://ictsforall.blogspot.in/search/label/GSR%202013.) This paper has outlined 12 success factors for effectiveness of USFs including policy and regulation, lexibility, transparency & accountability, active participation & inputs from all stakeholders, comprehensiveness of projects to cover all sustainability elements etc. I will write more about this soon.

USOF India's Unspent Balance under Criticism

In my previous post titled, "Questioning the Efficacy of Universal Service Funds: GSMA Calls for Re-evaluation and Reduction of the Universal Service Fund Levy,"  I had written that funding for Universal Access/ Universal Service is mostly from either the general budget or levies on operators. Given that it imposes a form of taxation and given that it is expected to meet certain legally, politically and ethically important targets, the subject of US in general and US funds (USFs)  in particular is always under scrutiny and debates on this issue range from questioning the need for US regulation in a competitive  market to arguing in favour/against inclusion of broadband  in its purview. Off late the balance seems to be tilting in favour of USF for funding national broadband plans and nation-wide OFC networks.  Thus discussions range from trashing the concept to seeing it as a vehicle for achieving state of art ICT services.

I had mentioned that the April 2013 GSMA Survey and Report available at GSMA Calls for Re-evaluation and Reduction of the Universal Service Fund Levy question the efficacy of USFs as means of  achieving the objectives of US.  As far as India is concerned there is praise for transparency in financial reporting and criticism for " inadequate or misguided articulation of USF objectives and strategy” that have encouraged urban rather than rural roll outs. (Please  also see my post on USOF India.). The findings of the survey including inter alia the large unspent balances point to the need for better institutional mechanisms that guarantee transparency, accountability and competitive neutrality while still being tailored to a country’s local context. Further we need to adopt a more innovative and flexible approach to US funding. We need to consider more bottom-up PPPs, more demand-driven projects and also projects that address demand side gaps to penetration of ICTs.

I have written earlier comparing the flexible bottom up multi-stakeholder approach of Sanchar Shakti programme that succeeded, with the more rigid, operator dependent approach taken in USOF's ICTs for PwDs project that did not. 

Traditionally, USFs have folowed a supply centric, top-down  approach wherein gaps are identified by the USF Administration and then projects are designed and bid out to select the Universal Service Providers (USPs). This approach may however not be flexible enough to meet the needs of various sections of the population and to address different reasons for the access gap.  Hence there is a need to consider a more flexible, consultative, collaboartive and multi-stakeholder approach to designing USOF programmes.

Again, USFs in many developing countries have problems of under-spending whereby funds continue to accumulate as not enough projects are initiated in comparison to collections.  This is partly on account of difficulties in conceiving appropriate projects meet diverse and ever evolving stakeholder requirements.  I believe that USFs set aside a percentage of available funds to be utilised for demand-driven projects emanating from the user community. Broad eligibility criteria could be pre-decided and placed in public domain along with transparent but mainly qualitative evaluation criteria and procedures. This would allow USF Administrations to maintain a shelf of projects that are useful and pertinent to end users. This is especially true for needs that are more application-centric such as projects for marginalised communities that may have a major content and capacity building component. This approach would lend a much needed dynamism to USF activities. It would also help USOF address demand side gaps in telecom penetration as opposed to supporting only supply side initiatives.

An article dated 28.7.2013 titled "Disconnect in India's rural telecom fund; $4.65 bn idling” highlights the unspent balances of USOF and comments of Administrator USOF thereof.It quotes Gabriel Solomon, the public policy head of Groupe Speciale Mobile Association (GSMA), the global association for mobile companies as having said that, 

"One  of the main reasons why such funds remain unused in many countries is that a competitive industry like telecom moves at a pace which these funds cannot keep up with," 

and that

"In a matter of a few years, the mobile industry in India has built huge infrastructure, connecting hundreds of millions of people. Why even consider a USOF (Universal Service Obligation Fund) now? If the private sector is appropriately incentivised it will always outperform the public sector."

As per the same article, the USOF Administrator has clarified as follows

"Out of the Rs.27,949.91 crore left unused, some Rs.20,000 crore will be deployed for the national optic fibre network project and another Rs.3,046 crore for installing 2,199 mobile towers in the nine Left-wing extremism-affected states."

"The criticism is valid for the time being. But we are evolving. As the projects start rolling out, we will need more funds," he said, adding the projects include one to link each of India's 250,000 village councils with high-speed data cables."

USOF India has many good schemes to its credit.(Please see many previous posts USOF India). What is  perhaps needed is a more imaginative, flexible approach and assurance of a level playing field between private and public sector operators.

Bhutan's Broadband Network

RaiTel which is a telecom company parented to the Indian railways is to set up Bhutan's Broadband Network. This network will connect all government institutes,  universities and other important institutes.  An agreement has been signed io this effect with the Ministry of Information and Communications of Bhurtan. The project is to be completed within six to eight months. Railtel is also involved in USOF projects including OFC for N.E states and NOFN.

The Long Term Effect of Too Low Wholesale Broadband Acess Tariffs

Effective regulation of tariffs is never an easy task. One argument would be to leave tariff alone but that luxury unfortunately is unavailable when markets are less than competitive. 

Regulating access to incumbents' infrastructure is often a part of ensuring service competition. I have written about this earlier under http://ictsforall.blogspot.in/search/label/Tariff. 

However, this tool is to be used with care. A European Commission Press Release dated 25th July 2013 highlights the need to balance short term gains of lowering access charges with the long term impact on investment. 

This press release relates to the suspension of the Austrian Telecom Regulator's calculation of regulated charges for access to the Austrian incumbent's broadband network on grounds that 

" it threatens to impede efficient investment in broadband, and could also create artificial barriers in the internal market." 

and

"The inconsistent access prices across the EU have a dampening effect on investment in modern networks. TKK's proposal must give national and multinational operators the right incentive to replace the old legacy copper network with modern technology, and provide stability and predictability."

The Mighty Mobile

In continuation of my last post on The Era of Mobile Internet, I would like to share with readers another unique initiative to provide free access to Wikipedia on Mobile Phones including zero.wikipedia.org, which is a text-only version of Wikipedia's mobile site, optimized for slower connections.. This will benefit about 60 million Indian subscribers and content will be available in English, Hindi and 18 other Indian languages. 

It is reported that this is a 3 year partnership and that "Wikipedia Zero was first rolled out in Uganda in April 2012 with mobile operator, Orange."

I think this demonstrates one of the possibilities of mobiles as a means of Universalizing the benefits of ICT enabled services. 

The Era of Mobile Internet

I have been writing about the benefits of mobile value added services. 

For a developing country where personal computer penetration is very low and power is an issue, mobiles/smart phones are the key to penetration of ICT enabled knowledge and services. India has a host of m-government initiatives to its credit including the Universal Service funded Sanchar Shakti for rural women. The mobile can also be usefully tapped in a  commercially viable manner to provide market access and educational, financial  and a host of other services especially to rural populations who are otherwise cut off from such services.

 It has been reported by Steven Musil, that  according to a year-end Internet Trends Report ,

 "13 percent of all Internet traffic is now executed from a mobile device, up from 4 percent just two years ago. In tech-savvy India, mobile Internet traffic has reached 60 percent, surpassing desktop Internet traffic, which has declined to 40 percent." (For more information please see  http://www.kpcb.com/insights/2013-internet-trends)

As mentioned in my earlier posts, given India's young population, mobile VAS is here to stay and represents an opportunity to  bridge the digital divide relatively easily. However with only 6% subscribers using smartphones and a less than 20% internet penetration we have a long way to go.

Telecom Regulation always Contentious

It is interesting as always to read about the pros and cons of proposed telecommunications reforms. Given the high stakes involved in this dynamic sector, both sides' viewpoints are often debatable and hotly debated,

It is clear that EU's proposed reforms by way of removal of roaming charges and standardisation of wholesale access prices are customer friendly. This seems fairly obvious as far as the regulator is concerned. However this is not  a foregone conclusion according to  incumbent operators. They argue that removal of roaming as a source of revenue will force operators to increase local call tariffs and that cheaper wholesale access will create rivals with little or no committed  investment. The latter may provide cheaper services but not necessarily help in terms of  innovation and advanced services that are favoured by fewer larger players.

The debate surrounding telecommunications regulations in India is equally contentious as may be seen from articles such as TRAI Harder on Roaming. There are invariable some market players who disagree with the Regulator.(http://www.moneycontrol.com/news/business/rcom-flays-trais-revised-rates-says-make-roaming-free_900694.html).

Getting it right may not be easy but is important to bridge the Market Efficiency Gap and hence increase telecom penetration to achieve Universal Service.

Kenya's Broadband Plan

It is good to read that Kenya is creating a 30 billion shilling venture fund (through sale of bonds) for broadband roll out. It is reported that, "Under the broadband strategy, the government plans to double its fiber-optic network to 60,000 kilometers (37,282 miles) by 2017 and provide free and subsidized laptops and mobile phones." Apart from government's budgetary commitments, private investment is also expected to rise substantially over the next decade. Another interesting development is the proposed merger of  "three state agencies, Government Information Technology Services, the Directorate of e-Government and the Kenya ICT Board, into a single entity to be known as the Kenya ICT Authority, Information, Communications and Technology." 

They seem to be following a well thought out Broadband Plan which has recently been identified as an important  driver of broadband penetration. The importance and effectiveness of National Broadband Plans has been recently endorsed by the U.N. which has stated that, “There is a need to move from ‘silo thinking’ to a more comprehensive point of view encompassing different sectors, in recognition of the nature of broadband as a cross-sectoral enabler.”

In India better inter agency coordination or even merger would help realize the goals of the New Telecom Poilcy 2012 and National IT Policy 2012 which are at present being implemented by two separate government departments. 

The Potential Blessings of High Capacity Broadband

An article on Australia's NBN denial of preferential access to any agency highlights how useful a high capacity FTTH connection can be for especially vulnerable segments of the population like ill, disabled or elderly people living alone. Health care providers could use such connectivity to deliver services and monitor their health and well being. The application service provider could either approach NBN directly for connectivity for this purpose or through one of its client access service providers. The end customers would only be dealing with the application (health) service providers.

The article highlights that NBN shall not give any preferential treatment "to government agencies or health organisations wanting to use the national broadband network to provide services directly to Australian citizens."

India's National Optic Fibre Network which is to connect 250000 village panchayats and is being implemented by an SPV named BBNL has announced that it will  offer free bandwidth free  to the Telecom Service Providers  from Block headquarter to Gram Panchayat  for connecting one BTS for two months from June 2013. This may be to encourage rural penetration and wean TSPs off microwave based back haul which is quite prevalent in the absence of fibre back haul.

Reforming USA's US Programme

As reported at "FCC Votes To Launch E-Rate Reform"

The FCC Friday launched its reform of the E-rate schools and libraries subsidy, proposing to refocus the program from connectivity to capacity and speed, collect more and better data, simplify the application process and take other steps to modernize the program.

The E-rate program provides discounted broadband service to schools and libraries through the FCC's Universal Service Fund, a fund paid into by telecom providers--the fee is passed onto subscribers.

The proposed reform has three main goals: 1) insuring affordable access to 21st Century communications; 2) maximizing its cost-effectiveness; and 3) streamlining its administration.

In my view the progranme continues to be very complicated and demanding of Administration. 

Please see my previous posts at 

http://ictsforall.blogspot.in/search/label/U.S.A%27s%20US%20Programme 

All Women BPOs in Conservative Indian States-ICTs for Women

The potential of ICTs to empower women inspired us in USOF to implement the highly successful Sanchar Shakti intiative. Sanchar Shakti  improves the target beneficiaries' confidence levels and financial independence by helping them with knowledge and market inputs related to their on going entrepreneurial activities. 

Rural Business Process Outsourcing (BPOs) is another example of the successful use of ICTs to empower rural women. While rural and semi urban BPOs in the Southern states of India do employ women, the engagement of women in ultra conservative Northern states like Haryana (HarVa) and Rajasthan (SFC)  is remarkable and demonstrates the power of ICTs to transform lives and societies. In both cases it was tough to get the women who had never even seen computers and whose activities outside their homes are strictly monitored by their men folk to even try out the initial training. However, the improvement in a family's financial  status while the women are still close to home, can be a powerful motive to allow the women to experience the empowering impact of working outside the home. ICTs can make this possible.

Stories in this regard can be seen at 

http://www.rediff.com/getahead/slide-show/slide-show-1-achievers-the-inspiring-story-of-a-bpo-in-rajasthan/20130718.htm#4

and 

http://articles.economictimes.indiatimes.com/2010-11-10/news/27587068_1_women-in-rural-areas-business-process-outsourcing-suman-devi

This makes a strong argument for an all out effort to promote universal access to broadband focusing especially on mainstreaming digitally excluded segments like women and the disabled.

Telecom Regulation Reform for Effective Competition & Growth-BCG Report on EU Regulation. Also, Indian Operators Finding Own Unique Solutions

I strongly believe that good regulation and competition are imperative for  achieving at least near universal service and digital inclusion and unlocking the potential of communications as a growth driver.

While in my opinion, the e-communications regulations in EU are worthy of emulation, it would appear there is always scope for improvement.

A study by The Boston Consulting Group (BCG) for the European Telecommunications Network Operators’ Association (ETNO) suggests  “a reformed regulatory framework” to ensure competition and encourage investment in advanced Next Generation networks.

Thus the report finds that “outdated and intrusive regulation is responsible for distorting market-based competition and discouraging capital investment, particularly by telcos, in NGA.  It states that,

“These trends must be turned around if Europe is to remain innovative and competitive in the global digital marketplace. Doing so requires a shift in the approach to regulation towards a new paradigm centred around:

1.    A harmonised-and substantially reduced-pan-European regulatory approach, relying mostly on established competition law

2.    A short- and long-term comprehensive view of all the costs and benefits for consumers which takes into full account the long-term benefits of investments for consumers

3.    A full view of the value chain, in a technology-agnostic manner and with a differentiated geographic lens

The study proposes five measures that will reverse the regulatory root causes of lagging telecommunications investment and help to unlock the funding required to build the ultra-fast connectivity that is increasingly the lifeblood of the digital economy:

• Substantial deregulation of fixed-line wholesale access
• A level playing field for network operators and digital services providers
• Spectrum policy that accelerates the build-out of mobile networks
• Permitting healthy consolidation in mobile
• Harmonising rules and procedures to unlock cross-country synergies

Taken together, BCG estimates that these five measures would increase telecom operator cash flows by a cumulative total of €105 billion to €165 billion by 2020 and asserts that a significant portion of these funds would be available for additional investment in next-generation networks.  Along with the roll-out cost savings that DG Connect initiatives, such as the pending “less digging = more broadband” regulation,are expected to deliver, this programme would significantly close Europe’s next-generation network investment gap, fuel growth and add jobs, and bring the goal of a vibrant Digital Single Market much closer to reality."

A similar approach would greatly benefit many a developing nation and perhaps developed nations too as previous my blog posts on telecom regulation and competition  would suggest.

While on the subject of Competition and Telecom reforms an article from the Economic Times highlights how smaller mobile operators are taking advantage of intra circle roaming to come together, share infrastructure and compete with bigger players even as the industry is critical of the current M&A regulation. Innovation and adaptation is the hallmark of Indian telecom market.

India's Broadband Initiative-Bharat Broadband Network Ltd

I have mentioned earlier that 2.5 lakh village panchayats (local government centres) are to be connected through the National Optic Fibre Network or the public sector SPV called Bharat Broadband Network Ltd. This roll out would take high speed broadband  to rural India and hopefully revolutionize rural telecommunications.  A rare update on BBNL appeared recently in Business Line. It reported inter alia that 

"A survey – to chart an optimum route [for OFC] - for all 2.5 lakh GPs in the country is underway. The National Information Centre has been roped in to create a digital map, with routes and nodes, using Geographic Information Systems technology. It would be hosted on BBNL Web site for the citizens to review it and provide feedback."

and that,

"Tenders for laying the network had been floated and financial bids were opened on June 7, however unsuccessful bidders have approached court and their bids were opened on June 21. Due to this delay, the tender would be finalised by July 31."

This is often a problem with PSU tenders and not limited to India. Expenditure so far has been Rs 229 crore or USD 38.346 Million.

It is hoped that these teething problems are soon overcome and the roll out is achieved on time. It is also hoped that  the resultant network is effectively regulated to ensure open access and a level playing field between participating Public Sector Units (PSUs) and various private entities involved in the broadband eco-system. Needless to say these supply side initiatives must be accompanied by measures to address other aspects of the rural broadband value chain.

How Markets Address Access Gaps

A news item titled "Vodafone to educate students on benefits of mobile internet" shows us how markets can effectively close access gaps. 

Vodafone India  has launched a programme called ‘Gammat Jammat’,  aimed at educating rural school children in the state of Maharashtra  about the  the benefits of mobile internet. To this end they will train over 300 school children and award them certificates of course completion. Simultaneously they will conduct a campaign to create awareness among adults covering 118 villages. Further, they have launched an entry level tariff plan with the same name, which gives concessional  internet access and 'a free 30 page booklet containing basic information on some key internet applications and websites that are relevant to rural customers. It has separate sections and applications catering to the requirements of Youth, Farmers, Job seekers, Housewives and Businessmen.'

It is stated that,

"Vodafone says it sees immense growth potential in mobile internet and are exploring options to further accelerate mobile data adoption through penetration, consumption and value addition. Various industry studies indicate a spiralling growth in sales of smartphones, particularly in locations beyond the metros. However, this community is still largely unaware on how they can get the best out of their data enabled handsets, through mobile internet"

Very recently I had written about "M Education and the Demographic Dividend" wherein I had discussed the potential of mobile screens to impart education in developing countries. India is a young country with 54% of the population being under 25.  In fact India is often cited as an example of the demographic dividend whereby the larger relative share of working age population has the potential to progress the economy to higher rates of growth. However it has been reported that only 12% of the 38 million internet users in India can access internet on their mobiles. The use of internet/broadband in rural areas can effectively compensate for the lack of various essential services and facilities and affordable smart phones and tariff plans and content in local languages can unlock this potential.

This   initiative by a service provider underlines the importance of markets and the need to address the Market Efficiency Gap which in turn leads to a conducive environment for operators to function and serve customers. Once servicing under served segments is seen as an opportunity rather than an obligation the government would need to concentrate only on the actual access gap.

Effective Regulation the key to Bridging the Market Efficiency Gap

 This is a recurring theme that I will be writing on. Its importance lies in the fact that by bridging the market efficiency gap we are economizing on time and cost involved in universal service and 100% digital inclusion. In the absence of effective regulation any attempts towards the latter would only bring short term and non sustainable gains. 

As far as telecom regulation in India is concerned it would appear that we need to take some brave steps to reconcile and simplify our licensing conditions and spectrum regulation. We are at present caught in the trap of  self created rigidities  that are not only at times outdated but often counter productive. The time is right as the telecom sector is at its lowest ebb and even the recent positive announcement of 100% Foreign Direct Investment (FDI) in Telecom is being viewed pessimistically on account of the overall regulatory environment. Please see "FDI Limit Aside, Raise the Bar for Governance"

An article titled An" Emergency Call from the Telecom Sector" appearing in the Business Standard on 17.7.13 draws attention to these issues.It highlights the need for bold decisions akin to the migration policy of 2003. It rues what it considers a tendency on the part of the telecom department to impose maximum penalties for fear of being accused as being partisan to telecom operators. 

Decision makers would find it much easier if rules were clearer.

The state of affairs today can in fact be gauged from the confusion and excessive recourse to litigation that characterizes our telecom sector today.  For example, there is  confusion surrounding the legality of intra circle roaming (ICR) and the distinction between ICR in the case of 2G and 3G licenses. The Controller and Auditor General of India cannot perhaps be faulted for criticizing actions that can be interpreted as being in contravention of stated policy/regulation which is in turn is often ambiguous and hence subject to interpretation.

The improvement of regulation and regulatory capacities is the order of the day. The former is relatively easy as international best practices and experiences can guide us, the latter requires a much broader spectrum of measures extending beyond just the telecom sector.

Talking about regulatory skills and capacities, another news item about the difficulties being faced vis-a-vis Italian communications Regulator's attempts to reduce access charges for fixed line grids, a common trend across EU, indicates that the overall institutional environment of an economy affects implementation and outcomes even where regulation is sound. I had written about this earlier at  http://ictsforall.blogspot.in/2013/07/closing-market-efficiency-gap.html

The Future of Australia's NBN: Technology Choices and More

I have written earlier about the technology debate centered around Australia's NBN i.e. Fibre to the Node versus Fibre to the Home.

Another news item from the Chicago Tribune on this issue titled "Australia election threatens shape of $34 billion broadband plan" would make it appear  that the views are polarized across political parties and vendor interests appear to play a role. Needless to say this is a bit surprising. One would hope that the telecoms and competition regulators' oversight would ensure adequate distance from such considerations. A revision in plans should normally be requited to be justified  on socio-economic grounds including consumer interests. Of course cost is a consideration in the above mentioned technology choice.

M Education and the Demographic Dividend

Two interesting news items caught my attention and I though these are worth sharing and reading.

The first is "Mobilising  Education in India" which highlights the potential of mobile screens to impart education in developing countries. India is a young country with 54% of the population being under 25.  In fact India is often cited as an example of the demographic dividend whereby the larger relative share of working age population has the potential to progress the economy to higher rates of growth.

In the near future India will be the largest individual contributor to the global demographic transition. A 2011 International Monetary Fund Working Paper found that substantial portion of the growth experienced by India since the 1980s is attributable to the country’s age structure and changing demographics. The U.S. Census Bureau predicts that India will surpass China as the world’s largest country by 2025, with a large proportion of those in the working age category. Over the next two decades the continuing demographic dividend in India could add about two percentage points per annum to India’s per capita GDP growth.[ Extreme actions are needed to take care of future basic minimum living standards including food, water and energy. As per Population Reference Bureau India's population in 2050 is projected to be 1.692 billion people. (Source: http://en.wikipedia.org/wiki/Demographic_dividend)

Quality education is critical for this existing/potential labour force. With schools and teacher availability being below par and computer penetration being very poor (Only 80 million personal computers in a nation of 1.2 billion population), we can take advantage of the affordability and ubiquity of smart phones as a medium for delivery of text, voice and video based educational content. The affinity that youth has for ICT enabled information and entertainment is a major plus point. 

This brings to to the second news item of interest titled "Making the Most of Mobiles" This article points out that even in the absence of internet,(only 12% of the 38 million internet users in India can access internet on their mobiles), micro secure digital (SD) cards are used to a good amount of store music and video on second/third hand smart phones by even poor labourers. This indicates that large variety of content can be made available even offline and the is a huge market potential in this area.

The increasing trend of educational material from even top universities being available free of cost is an opportunity waiting to be tapped. In India's case, ensuring affordability of smart phones, better & affordable connectivity (and in the interim  availability of content offline) and translation of content to local languages would be key requirements for us to reap the benefits of M-education.This would also be true of many developing countries.

Another wonderful thing about mobile education in my view is that with a little effort it can be made accessible to persons with disabilities. In fact mobile content is a powerful tool of empowerment of PwDs as long as its accessibility is ensured. 

USFs across the developing world would do well to concentrate of creating an enabling environment for M-Education. India has made a start with Sanchar Shakti but we need to do more.

U.S.A's Universal Service Programme

A Study titled "Unrepentant Policy failure-Universal Service Subsidies in Voice and Broadband" by Hazlett and Wallsten makes a scathing attack on U.S.A's US programme. In particular, it criticizes the High Cost Fund and the E Rate programme. It suggests shortcomings in FCC's reform efforts. For example resorting to bidding only when the incumbent refuses to "offer services at subsidies based on cost models." The USF programme has been criticized for introducing market distortions. One of the sources of this distortion being a tax on long distance services and wireless voice services to fund the programme. Another being the distortion to competition by subsiding one technology (landline) vis-a-vis competitors (satellite and cable). 

Reproduced below is an extract of the Abstract:

In  the  first  half  of  2013,  the   Universal  Service  Fund  levied  a  nearly  16  percent  tax  on users  of  fixed,  mobile,  and  VoIP  communications,  spending  nearly  $9   billion  to  extend  networks.  Yet, USF expenditures –  about $110  billion (in 2013 dollars) since 1998, of which $ 64  billion went for telephone carrier subsidies  --  extending  voice services to, at most,   one-half of one percent of U.S. households.  This generous estimate of  about 600,000 residences  implies  a  cost -per-home of  $106,000 ,  just  counting  the  federal carrier  subsidies. Entrenched  interests  make  the  program exceedingly difficult to change. These interests include hundreds of rural telephone companies, inefficiently small and opportunistically expensive because funds are paid out  according to  cost -plus  criteria .  Some carriers receive more than $10,000  per line per year   to support voice service. Yet,  FCC  data  show  that  mobile  voice  service  is   available  to  99.9  percent  of  households  and wireless broadband service   to   over   99.5% of the U.S. population, including 97.8 percent of rural residences.    In addition, satellite systems  supply voice  and data services to households virtually everywhere people live in the United States, using networks built without subsidies.   Even with subsidized  lines,  subscribers  typically  pay  $400  a  year  or  more  just  for  voice  service . While some USF dollars help low -income subscribers pay their bills, 80% of poor households receive no  subsidies  and  yet  pay  the  USF  tax.   Studies,  including  several  by  the  Government Accountability  Office  (GAO),  have  repeatedly  revealed  USF  waste,  fraud  and  abuse. The Federal Communications Commission (FCC) issued a 751-page Order  in late 2011 purporting to deal  with  part  of  the  situation,  but  rather  than  fixing  fundamental  problems  the  FCC  Order extend s subsidies from voice to broadband and mandat es   increases in  payments to carriers.  Even when  attempting  to  rein  in  costs,  the  Order   applies Band-Aids  where   tourniquets  are  needed.  Emblematic  of  the  new  rules  is  a  measure  to  limit  subsidies  to  rural  carriers  to  $3,000 per line per year.  This laughably spacious ceiling  –  in a day  when satellite voice -and-broadband service is   offered  to  virtually  every  U.S.  household  for $600 a year   -- will  fail  to  remedy  the  endemic waste  in  the  USF.    Instead,  it  targets   the  “headline  risk”  policy  makers  now  face  when grotesquely  profligate  industry  payments  are  made  public.   Most  critically ,  the  FCC  provides  a new rationale for subsidies –  substituting “broadband” for “voice” –  breathing re new ed   political life  into  a  failed  government  initiative  that  taxes  urban  phone  users,  most  heavily  poor households  who  use  wireless  phones  and  make  long -distance  (including  international)  calls,  in order to subsidize phone companies and property owners in rural markets.  Indeed, the reform’s first effects were to increase   the High Cost Fund by about $400 million.   Upon  examination, the fig  leaf  of  “public  interest”  for  this  transfer  wilts.  Any  plausible   cost -benefit  test  reveals  that economic welfare would increase were the entire $9 billion per year USF program eliminated.

Counter-view

[i}n a statement provided to Telecompetitor, the FCC  suggested that Hazlett’s and Wallsten’s numbers are outdated. An FCC spokesman noted that in 2011 — a year after the period the authors studied — the commission took “unprecedented steps to end waste, fraud and abuse,” including capping subsidies at a maximum of $250 per line per month and limiting corporate overhead expenses.

My previous post at http://ictsforall.blogspot.in/search/label/Connect%20America%20Fund and comments thereof may also be seen.

National Broadband Plans-Technology Choices

National Broadband Plans always involve technology choices. The fibre vs wireless debate is in my opinion rather unnecessary until the state decides to fund one and not the other. In India, the regulator came out in strong criticism of a USOF Wireless Broadband Scheme as it appeared to see this programme as a competitor to the National Optic Fibre Network. Though USOF tried its best to plead that the two were complementary and not mutually exclusive, the former has not seen the light of the day while the latter is being rolled out as BBNL. The result is that rural areas continue to have negligible broadband penetration and will have to wait patiently till fibre is laid up to the village panchayat and then (hopefully) access providers use this connectivity to bring them high speed broadband on wireless. It is a moot point why both could not have been achieved simultaneously. Please see my previous posts on this topic at

http://ictsforall.blogspot.in/search/label/National%20Broadband%20Plans and http://ictsforall.blogspot.in/search/label/Broadband%20networks

It is also interesting to read about the technology debate (fibre to the node plus wireless vs. fibre to the home) in the context of Australia's NBN. While, cost, bandwidth and speed do play an important role in how one perceives the relative benefits, I would also be concerned about platform and service competition. Please see "Lets not go back to the dark ages on technology" which argues for FTTH and "Future of broadband going down to the wire" that argues against it.

Mobile VAS as a means of Mpowerment

I have already written about Indian USOF’s Sanchar Shakti programme. This programme has been instrumental in bringing highly customized  knowledge inputs to rural women’s Self Help Groups through mobile VAS helping them improve their livelihoods, self confidence and social standing. The uniqueness of this programme lies in its ability to reach out to these women in situ i.e. in their villages and homes and in that the content being delivered to them is gender sensitive and in the local language. Sanchar Shakti includes many woman farmers in its purview. Its gender specificity makes it a very unique programme in a country which still does not give enough importance to  the fact that many small holdings are farmed by women, while the men folk seek jobs on construction sites/urban areas.

Other  recent  initiatives include the soon to be launched Kisan portal for framers in India wherein 'SMS advisories and alerts will enable farmers to take informed decisions relating to different aspects of farming including crop production and marketing, animal husbandry, dairying and fisheries.' It has also been stated that, 'Officers of various departments, experts and scientists in research institution and in the field will use this portal for disseminating information, giving topical and seasonal advisories to farmers in their local languages.'

A simple form of communication like mobile SMS can be a powerful tool for empowerment of two way communication between the government and  target beneficiaries in a country where mobile penetration is strong while fixed line and broadband penetration is abysmal especially in rural areas. mVAS can provide knowledge and market information in situations where access to both is difficult on account of poor infrastructure and facilities.

A  news item titled Mobile Phone-Medically Yours describes the innovative use of mobile phones by the Government to reduce maternal and infant mortality by training health workers and providing tools for data collection and knowledge dissemination. Like Sanchar Shakti, here too the content is in the local language. What is particularly noteworthy in the case of the mobile Kunji  programme described in this article is revenue sharing between the NGOs, Government and service providers demonstrating  the commercial viability of such beneficial applications. This is also one of the aims of the Sanchar Shakti programme

Closing the market Efficiency Gap-Regulation and Competition

As I mentioned earlier closing the Market Efficiency Gap demands effective regulation and competition. In my view there is no point in utilizing public funds or USFs to take telecommunications to market segments that operators would willingly serve if they were facilitated through effective regulation and forced to as a result of healthy competition. This is one area where developing countries with overall institutional (implementation) weakness may fall short.

This makes it all the more important that they focus on putting in place sound laws and regulation modeled on international best practices but adapted to local context. This would ensures inter alia a level playing field  which precludes vested interests from rent seeking behaviour that is detrimental to the economy as a whole.

As an observer of worldwide developments in the area of telecom regulation I would like to draw the attention of readers to to some recent  news items:

The first is about investigation of several telecom giants for suspected abuse of dominance by the competition wing of the European Commission.  This can be read at:

http://www.theregister.co.uk/2013/07/11/european_commission_inspects_telcos_over_alleged_violation_of_competition_rules/

The second is about the likely  mandating of a reduction in access charges for fixed line grid by the Italian firm Telecom Italia SpA by the Communications Regulator of Italy. This article also speaks about the general trend towards reduction in network access charges (both fixed line and mobile) across Europe as a result of conscious efforts of regulators to enhance penetration.This is available at:  http://www.businessweek.com/news/2013-07-10/telecom-italia-is-said-to-face-about-6-percent-cut-in-grid-access-fees.

The third is about a  more liberalised M&A regime in Europe consistent with market conditions.  This includes a softening of attitude towards active infrastructure sharing. Ultimately increasing penetration is also about ensuring the financial health of the telecom opertaors. This can be viewed at http://www.mobileworldlive.com/fours-a-crowd.

An article  from the Indian Express dated 12.7.13 about present regulations relating to M&A in India may also be of interest to readers. This may be viewed at http://www.indianexpress.com/news/permit-spectrum-trade-m-as-will-follow-vodafone/1140801/

The Market Efficiency Gap

As I have mentioned earlier in my post at http://ictsforall.blogspot.in/search/label/Universal%20Service, Universal Access (UA)/ Universal Service (US) as obligations or policy instruments should ideally come into play when  in spite of effective regulation, liberalization and competition being in place,  the still market fails to serve certain areas or sections of population. The latter is known as the  Actual Access Gap and may arise on account of geographical or socio-economic reasons etc. The former are instruments to close what is known as the Market Efficiency Gap.

Source: WDRP 432(2002) as modified by Archana.G.Gulati 

Some developed and many developing countries may however find themselves in a less than ideal situation where USFs are funding more than the actual access gap on account of failure to  achieve market efficiency.  

An important aspect of effective regulation in today's world is spectrum management. OFCOM's liberalization of spectrum policy in consumer interest a reported at http://www.mobileworldlive.com/uk-regulator-gives-green-light-for-4g-in-2g3g-spectrum is an example of such effective regulation. An article titled "Key to robust telecom policy: Place markets above command and control" that appeared in the Economic Times on July, 8 2013 may also be of interest to readers. It highlights  inter alia the requirement of effective spectrum management in India including flexibility of its usage across technologies.

Regulation and USFs- Support for Rural Wire Lines in India

One of the amendments to the Indian USOF Rules which instituted an exception to the prescription of bidding as a means of selection of Universal Service Providers was carried out in 2008 on the recommendations of the regulator. Vide this amendment, Rs 6000 crore (an amount equivalent to USD one billion today) would be provided to the incumbent Bharat Sanchar Nigam Ltd (BSNL) over a period of three years “operational sustainability of rural wire lines in lieu of Access Deficit Charges being phased out.” 

It has been reported  by the Economic Times on 9.7.13  that BSNL is to get a Rs 1500 crore life line from USOF again.

It may be of interest for readers to know that about 98.6% of USOF funding has gone to support rural wire lines for voice and broadband connectivity. However BSNL which is the recipient of more than 86%  of USOF’s  total subsidy pay out  continues to steadily lose  rural wire line connections. These could have been maintained, improved and expanded by BSNL to provide broadband to rural areas. Much of this infrastructure was  put in place before BSNL was carved out of the Department of Telecommunications. It thus  represents a large amount of government investment besides presenting a huge competitive advantage for BSNL, considering  that it owns 99.9% of rural wire lines and rural India has negligible broadband penetration. This advantage has not been leveraged by BSNL. Nor has unbundling of this infrastructure been carried out in spite of regulatory recommendations.

Against a Rs 1500 crore scheme initiated in January 2009 to support rural wire line based broadband with a scope to add about  18,00,000  connections (with subsidy being linked to the number of connections) BSNL had added less 400000 connections over a period of 3 years.

A USOF Supported Rural Broadband Connection in West Bengal

In this background, it is a moot point whether such additional funding and that too from USOF is justified and whether it will have any positive impact on rural wire lines or broadband.

As far as rural broadband markets go, there are larger regulatory issues involved. Yet, limiting our concerns to USOF it can be cautioned that due care should be taken as to the ends and means in using a Universal Service Funds.  Laxity in maintaining competitive neutrality would tend to have long term negative implications on  the affected markets and defeat the very purpose of Universal Service.

A thought provoking article on public sector enterprises in India may be seen here
http://www.telegraphindia.com/1130708/jsp/opinion/story_17076125.jsp#.UdohM6xhAng

More on USF Programmes with Tariff Discounts

In continuation of my earlier posts on the issue of USF schemes/projects having a tariff discount component, I would like to add some further thoughts. A view has been expressed by a  very experienced USF expert that tariffs discounts in case of voice services, can create artificial differences with non USF areas and discourage operators who must have a business case to invest. I would say that these arguments have merit. In addition to my comments cautioning against being too optimistic about tariff discounts at the bottom of  the post at http://ictsforall.blogspot.in/2013/07/a-discussion-on-tariff-discounts-for.html, I  would like to clarify as follows.

In my previous posts I had alluded to a rural tariff ceiling. This was  set by the telecoms regulator and is pan India. Thus, it covers all rural fixed line subscribers uniformly. However, the regulatory requirement at present is that this tariff plan must be made available. It need not be the only plan. Operators are free to offer other tariff plans. The idea is to ensure that the poor have at least some basic plan for affordable service. Both operators and subscribers have a wide choice in this case.

In India, rural subscribers mostly opt for prepaid plans which ensures that they do not pay more than their budgeted amount. This is true for both  voice (which is almost entirely wireless) and data.  

By discounts in case of USF schemes I mean making available at least some cheaper plans so that the poor can avail of some service. As mentioned above, in the case of voice (fixed) this was mandated by the regulator not by USOF.

In fact when USOF scheme for rural household fixed lines brought in competition from CDMA phones, the Universal Service Providers (USPs) offered extremely attractive prepaid tariff plans with generous free incoming components to attract customers, and with great success in terms of increasing subscription (but not revenue. (Please see http://ictsforall.blogspot.in/2013/06/ensuring-affordability-of-usf-supported.html ).

These plans were far cheaper than the regulator's tariff ceiling plan. Thus, in the case of voice, USOF India did not specify tariff discounts.The USPs responded voluntarily with tariff plans in response to market conditions.

As already explained in my previous post post  http://ictsforall.blogspot.in/2013/06/ensuring-affordability-of-usf-supported.html, for data services (Wire line Broadband Scheme), USOF required entry level plans to be made available during the OBA contract period but the USP could also offer any number of other plans. This has worked well as a means to attract new users who have subsequently upgraded to costlier packages with higher download limits. As far as the operators business case is concerned, USOF calculated subsidy benchmarks assuming that the bulk of rural subscribers would at least initially prefer the cheapest plan. Thus, USPs stood fully compensated for the discounted tariff plan.

Incumbents and National Broadband Networks-Broadband Delivery U.K Project

As I have written earlier, despite our enthusiasm to roll out high speed, fibre based broadband networks, care must be taken not to re-create monopolies. While it may be easier, faster or even cheaper in the short run to rely on the incumbent for such roll outs, in the long run this may prove counterproductive.  The price that we may have to pay for lack of competition and the regulatory burden of ensuring genuine non-discriminatory, open access may literally take us back to the days of fixed line monopolies. There is also a good chance that the none of the  reasons for relying on the incumbent are ultimately validated by the actual roll out experience, in the sense of time and cost savings.

Even when bidding is resorted to, the project and bid design must ensure a level playing field between incumbents and other players. 

A recent news item about the Broadband Delivery U.K Project (BDUK) at  http://www.v3.co.uk/v3-uk/news/2279518/government-rural-broadband-plans-savaged-by-nao-report indicates that  doubts have been raised on this count and  the project has been criticised by the National Audit Office for  favouring British Telecom at the cost of competition and perhaps economy.

The chair of the Public Accounts Committee (PAC) is stated to have said that, 

“The DCMS has not had a good enough grip on its rural broadband programme. In an attempt to reduce public costs and risk, the department has ended up stifling competition,” ….......

"BT has won all 26 contracts so far. It is not much of a competition when you end up with only one supplier actively bidding in a framework, despite nine organisations being interested at the start.” 

A Discussion on Tariff Discounts for USF Supported Services

My esteemed colleague David Rogerson whose query had inspired my previous post on this subject titled "Ensuring Affordability of USF supported Services" has kindly shared his thoughts on the subject. My comments are a placed below his post.

Discount policy for Universal Access & Service Funds (UASF)

By David Rogerson

The objective of the UASF is to promote universal access and service (UAS).  It does this by subsidising network roll-out and customer access in situations where this cannot be achieved commercially.  The subsidy helps to extend the coverage of telecoms services and to make service affordable in these areas.  Such a policy not only benefits areas and customers that are newly connected to the network; it also benefits existing subscribers as they have increased opportunities to communicate with other network subscribers.  This is called a network externality effect. 

In some areas the benefits of USF subsidy, including both the direct benefits to the customers in the newly-connected area and the indirect network externality benefits experienced by all existing subscribers, will be maximised if a tariff discount is offered in the UAS area.  The reason is illustrated in Exhibit 1

Exhibit 1: Justification for tariff discount in UAS areas

The logic of Exhibit 1 may be described as follows:

• The tariff discount will increase demand in the UAS area, as lower prices are more affordable
• The increase in demand will (at least up to a certain point) increase profitability within the UAS area, since the costs of providing service are largely fixed whereas revenues are primarily a function of demand.  
• By setting the discount at the right level the amount of the subsidy required for the area may be minimised.  The level of the discount should theoretically be set at the level that maximises profits: beyond a certain point the loss of revenue from all subscribers in the UAS area paying the lower tariff will outweigh the increase in revenue from the additional subscribers who only come onto the network because of the discount.
• The increase in demand that results from the discount will have two other effects:
• It will increase the network externality benefits
• It will result in economic development within the UAS area . (Academic studies, including those of the World Bank, have shown a close correlation between GDP per head of population and telecom network penetration (i.e. subscribers per head of population).   
• Both of these additional effects are relevant in the construction of a discount policy:
• The increase in network externality benefits may be used to justify the discount policy in the first place
• The increase in economic development may be used to justify the reduction of the required discount level over time.  

A lot more work would be required in order to provide a detailed justification of the actual level of discount that should be provided.  Such work is beyond the scope of the present exercise.  However, based on the existing practice we may propose the taxonomy shown in Exhibit 2.  This suggests that the initial level of discount is established with reference to the ratio between average income levels in the UAS area compared with the nation as a whole; and the evolution of the discount level over time depends on the ratio between network penetration levels in the UAS areas compared with the nation as a whole.  Given that there is likely to be a time-lag between penetration increases and economic development, we further suggest that the discount level for each area is established for a period of 3-5 years at a time.

Exhibit 2: Evolution of UAS tariff discounts over time

My Comments:

David has presented  an interesting  and though-provoking analysis. Some additional considerations may be  as follows:

1. The assumption of incremental or marginal cost per additional subscriber being nominal (per se or compared to the loss of revenue on account of discounts) may not be applicable to all telecommunications services-take for example the case where the last mile involves copper line or OFC connectivity. 

2. Additional customers need not always translate into higher revenues as for example when customers in poor rural areas use the phone mainly to receive rather than make calls. A real example of this was seen in India where CDMA telephones were offered  by USPs with 3 year incoming free prepaid tariff plans (on voluntary basis) to lure more customers.(Additional upfront subsidy was paid for each additional customer added and  maintenance subsidy for customer  retention.) However, the USPs ended up having to pay for minimal recharges to avoid disconnection of these phones, which would have impacted the their subsidy disbursements under the USOF contract. The poor in rural areas would simply not make outgoing calls. They were happy to receive calls as for example from earning family members in urban areas.

3. However, there is no denying the network effect and positive externalities of  having hitherto unconnected citizens join the network. Hence, USF schemes must at times go beyond purely economic cost-benefit analysis at least in the short run and justification for the roll out or discounted tariff may have to encompass a wider socio-economic cost-benefit analysis. In any case, telecommunications services are proven to increase a nation’s competitiveness in the long run making a strong economic case for USF interventions.

4. In some cases as in the case of USOF’s Wire line Broadband scheme (discussed at  http://ictsforall.blogspot.in/search/label/Tariff   the discount strategy pays off in terms of giving customers a taste of a new service. While some subscribers may continue with an entry level plan, others do migrate to the available higher download (more costly) plans, giving the USPs revenues a boost and compensating for the discount and then eventual  withdrawal of subsidy.

5. The smart subsidy concept referred to in my earlier post at  http://ictsforall.blogspot.in/search/label/Tariff,   would thus take into account subsidy needed to fill the revenue gap, including that caused by discounted tariff.

6. If demand projections can be made with some degree of accuracy for the target area/population, an assumption about percentage of disposal income that would be spent on telecommunications (say 2.5-3%) could help us calculate the required discounted tariff to encourage subscription. As a USF Administrator, I would  be more concerned about using the modeled demand projections to calculate a tapering subsidy requirement keeping discounts fixed during the OBA contract period and leaving it to the USP to retain or dismantle discounts thereafter as per its business case. There could be customers who would not be able to afford the non-discounted tariff at least in the short/medium run. Thus, I may have to mandate that some discounted tariff plans continue beyond the contract period or I may have to subsidise these customers on an on-going basis even after the Output Based Aid contract comes to an end.

The Broadband Ecosystem

I reproduce below a news item about the release of an ITU report, "Planning for Progress: Why National Broadband Plans Matter."

• Countries with a clearly-defined national vision for broadband roll-out are significantly out-performing those with a more relaxed approach, according to a new report by the International Telecommunications Union.

• The report observes that there were 134  national broadband plans in place around the world by the middle of 2013, all of which aim to increase usage of broadband-enabled services and applications by citizens and businesses.

• Such plans are found to have a big impact on market penetration of fixed and mobile broadband services, with average penetration around 8% higher for both in those countries with a formalised plan.

• Market competition is also believed to play an important role here, with competitive markets averaging 1% higher penetration for fixed broadband and 26% higher for mobile broadband than those markets with a monopoly.

• Dr Hamadoun I. Toure, secretary-general of the ITU, said: “Governments are realising that broadband networks are not just vital to national competitiveness, but to the delivery of education, healthcare, public utilities like energy and water, environmental management, and a whole host of government services. Broadband is the key enabler not just of human interaction, but of the machine-to-machine communications systems that will underpin tomorrow’s world.”

• The study concludes by stating that the full economic and social benefits are most likely to be realised where there is strong partnership between government and industry, and counsels a consultative, participatory approach to policy in conjunction with key stakeholders.

Source: http://www.iptv-news.com/2013/07/national-broadband-plans-crucial-to-success-says-itu/

The report indicates regional differences different policy in  instruments being used to promote broadband

Most importantly the report highlights the need to focus on the entire broadband ecosystem rather than just the supply side. At present relatively few countries focus on the entire gamut of measures needed for true broadband related inclusion.

It  cites the case of Brazil, as a well formulated plan based on widespread consultation which takes into account the infrastructure provision targets, a conducive regulatory environment combining infrastructure sharing and competition, as well as fiscal incentives.

The results as reported are heartening,

The private sector has responded by accelerating the deployment of infrastructure. There has been significant uptake in both fixed and mobile broadband services – fixed broadband is now available in all 5,565 municipalities of the 27 states in Brazil. Since 2009, total fixed broadband subscriptions have doubled from 10 million to 20 million lines in service.  Mobile 3G services now reach 3,376 municipalities in all states, currently covering 89% of the country´s population. Mobile broadband has exploded from 7 million lines in service in 2009 to 70 million today. Mobile 4G services were recently launched in April 2013 in major State capitals, with extensive coverage targets over the next few years.  Twelve thousand community telecentres have now been equipped and provided with broadband Internet access. 

In India apart from the National Optic Fibre Network-A USF supported project, a clear broadband policy articulation is found in the National Telecom policy 2012.  Please see previous posts on National Broadband Networks and Universal Service more information.