ICTs should be available, affordable and accessible for all. Today, universal service, competition and associated issues of consumer protection and privacy have become all the more relevant given that digital technologies increasingly underlie the economic, social and political aspects of our lives. There is a need for international collaboration, cooperation and cross-cutting regulation.The author would like to discuss all these issues and invites comments. Disclaimer: Views are personal.
My perspective on enforcing special voice service tariffs for rural areas .... which I think you were referring to in your latest post on this subject ....... is that they would have little value and most probably would be counter-productive. Here are some reasons:
1. USAF areas today, in the relatively mature markets where they exist (i.e., mobile operators have reached out pretty much to the countries except for "coverage holes" and scattered areas), are typically a patchwork of villages, wards, partial districts, etc., and exist beside areas that were served commercially. The people who live in the USF areas are not necessarily any poorer or more in need than those in the served areas. In one case where I have seen the regulator try to impose USF (quasi-fixed) tariffs on mobile operators in USF areas, there was confusion and complaints which seem to be leading the regulator to even more draconian measures that have no justification ad will reduce competition to serve the areas. 2. Rural customers need service - not special tariffs - at the same rate as the rest of the country. They also have pretty clear ideas of what they can afford. If they exceed that, they get more incoming calls from their urban relatives. I don't really accept the demand hypothesis that they would spend more if tariffs are lower since the have quite clever ways of securing service for the levels of expenditure they can afford. This is why operators are happy to connect them and maintain their SIMs even though the originating tariff may be low and apparently uneconomic. Let's focus on providing universal service, not a mish-mash of special tariffs which favour only the people who were last to be served. 3. There are also issues related to whether customers "roaming" into USF areas should receive the discounts - of course not. The operator needs to discriminate call accounting though it is necessarily easy to do, unless users register their SIMs locally. 4. One measure that I find logical however, is to require that mobile operators provide a "home zone" tariff option, with lower call rates for those who are not traveling outside their home village or area. These can be activated or de-activated by sms, and national tariffs automatically kick in when the customer travels outside and makes use of the network's full mobility capabilities. This is a pay-for-use feature that allows less-mobile villagers to benefit and to make more calls on their limited budget. It is economically justifiable for both user and operator. 5. For success, USFs need to collaborate and partner with the mobile operators to secure their active participation in USF competitions. I have not found a mobile operator that feels that special USF tariffs, beyond home zone or special promotions (which could be used to encourage start-up usage)are economic. They are facing enough challenges to participate in smart subsidy schemes already and the USF should be seeking to maximize operator collaboration and medium-long term sustainability.
These are not a comprehensive treatment of the issue, but I welcome further comment and debate.
I am grateful to Andy for his comment. I am also in complete agreement. As already brought out in my posts on this subject, service providers themselves would cater to the demand for voice related tariff plans-especially in case of mobile telephony with low marginal costs per additional customer. Indian USPs were quick to develop long term validity, free incoming plans with the flexibility to recharge even with very low value amounts. However, when it comes to broadband, the progression from entry level packages (which were made available compulsorily as a part of the USF scheme) to higher value packages which USP was also free to provide suggests that broadband markets need nurturing. Please see http://ictsforall.blogspot.in/2013/06/ensuring-affordability-of-usf-supported.html
An excellent piece from Andy Dymond demonstrating the market distortions that may result from a well-meant policy of tariff discount in underserved areas. Such discounts can, at most, be a short-term phenomenon but these are cogent arguments for the "better not start it at all" position. Thanks.
Thanks. Well said. "The better not start it all" is a very important consideration when it comes to avoiding avoidable market distortions.
US interventions being in the nature of subsidy are strictly speaking potentially distorting The intention should be to minimize any negative impact on long term competition and growth.
My perspective on enforcing special voice service tariffs for rural areas .... which I think you were referring to in your latest post on this subject ....... is that they would have little value and most probably would be counter-productive. Here are some reasons:
ReplyDelete1. USAF areas today, in the relatively mature markets where they exist (i.e., mobile operators have reached out pretty much to the countries except for "coverage holes" and scattered areas), are typically a patchwork of villages, wards, partial districts, etc., and exist beside areas that were served commercially. The people who live in the USF areas are not necessarily any poorer or more in need than those in the served areas. In one case where I have seen the regulator try to impose USF (quasi-fixed) tariffs on mobile operators in USF areas, there was confusion and complaints which seem to be leading the regulator to even more draconian measures that have no justification ad will reduce competition to serve the areas.
2. Rural customers need service - not special tariffs - at the same rate as the rest of the country. They also have pretty clear ideas of what they can afford. If they exceed that, they get more incoming calls from their urban relatives. I don't really accept the demand hypothesis that they would spend more if tariffs are lower since the have quite clever ways of securing service for the levels of expenditure they can afford. This is why operators are happy to connect them and maintain their SIMs even though the originating tariff may be low and apparently uneconomic. Let's focus on providing universal service, not a mish-mash of special tariffs which favour only the people who were last to be served.
3. There are also issues related to whether customers "roaming" into USF areas should receive the discounts - of course not. The operator needs to discriminate call accounting though it is necessarily easy to do, unless users register their SIMs locally.
4. One measure that I find logical however, is to require that mobile operators provide a "home zone" tariff option, with lower call rates for those who are not traveling outside their home village or area. These can be activated or de-activated by sms, and national tariffs automatically kick in when the customer travels outside and makes use of the network's full mobility capabilities. This is a pay-for-use feature that allows less-mobile villagers to benefit and to make more calls on their limited budget. It is economically justifiable for both user and operator.
5. For success, USFs need to collaborate and partner with the mobile operators to secure their active participation in USF competitions. I have not found a mobile operator that feels that special USF tariffs, beyond home zone or special promotions (which could be used to encourage start-up usage)are economic. They are facing enough challenges to participate in smart subsidy schemes already and the USF should be seeking to maximize operator collaboration and medium-long term sustainability.
These are not a comprehensive treatment of the issue, but I welcome further comment and debate.
I am grateful to Andy for his comment. I am also in complete agreement. As already brought out in my posts on this subject, service providers themselves would cater to the demand for voice related tariff plans-especially in case of mobile telephony with low marginal costs per additional customer. Indian USPs were quick to develop long term validity, free incoming plans with the flexibility to recharge even with very low value amounts. However, when it comes to broadband, the progression from entry level packages (which were made available compulsorily as a part of the USF scheme) to higher value packages which USP was also free to provide suggests that broadband markets need nurturing. Please see http://ictsforall.blogspot.in/2013/06/ensuring-affordability-of-usf-supported.html
ReplyDeleteAn excellent piece from Andy Dymond demonstrating the market distortions that may result from a well-meant policy of tariff discount in underserved areas. Such discounts can, at most, be a short-term phenomenon but these are cogent arguments for the "better not start it at all" position. Thanks.
ReplyDeleteThanks. Well said. "The better not start it all" is a very important consideration when it comes to avoiding avoidable market distortions.
ReplyDeleteUS interventions being in the nature of subsidy are strictly speaking potentially distorting The intention should be to minimize any negative impact on long term competition and growth.