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.

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.

Ensuring Affordability of USF Supported Services

A query from an esteemed telecom expert and colleague made me feel that this may be a good topic to cover today.

Part of the reason for the Actual Access Gap referred in my previous post is the non-affordability of services for certain segments of the population. This could be because they have lower than average paying capacity in absolute terms (say the urban poor) and/or relative to cost of provision of the services (on account of geography/ own disability etc.). In developing countries, the bulk of the population in rural areas could easily fulfil both the absolute and relative criteria making it essential to provide services not only at par with urban tariff rates but at times below urban rates in spite of higher costs of provision.

The underlying rationale of many an output based aid (OBA) USF project is that if  subsidy can be provided to help the USP break even and cover CAPEX and OPEX for a finite period, demand will eventually pick up enough to make services profitable (even at a lower tariff rate.) In any case ideally in an OBA based USF project, once the USF contract comes to an end, the USP should be  free to revise traiffs as per market conditions and other (non USF related) regulatory restrictions. In the  interest of  protecting its investment the USP would not like to drive away customers by charging unreasonable tariffs.

In India, the USOF mostly follows the OBA route. USOF projects are bid out. Reverse bids are floated  with a maximum permissible subsidy level based on a detailed benchmarking exercise. Tariffs in India are regulated by the Telecom Regulatory Authority (TRAI) and beyond the jurisdiction of USF. Thus, USF may in its tenders/contracts refer to TRAI regulations on say fixed line tariffs in rural areas and require rental and call charges to be at par or lower than the same. Alternatively, as explained in my previous blog titled "Broadband Networks through the Infrastructure Sharing Route" the USOF tender/contract may require that during the contract period the USP offers subsidized infrastructure/services at a discounted rate with reference to TRAI's ceiling rates. In USOF's mobile infrastructure and services scheme, the static infrastructure was required to be offered rent free by the wining infrastructure provider to the three winning mobile service providers who would share the towers. However, mobile services themselves could be offered at any rate to end users. With their rentals costs being nullified and given the competition between three players it could be assumed that they would vie with each other to provide attractive tariff plans to the served rural population. In fact my own experience with monitoring of this scheme has shown that in this case it was customer services (such as regular supply of recharge vouchers for pre-paid connections and QoS  which distinguished the more successful USPs from the laggards). In USOF's Wire line Broadband Scheme a couple of very affordable entry level broadband tariff plans were arrived in consultation with the USP (selected by nomination in this case on account of incumbent owning 99.9% of rural wire lines). These were required to be offered along with any other tariff plans (as per USPs choice) to rural customers being served through subsidized infrastructure. (Broadband tariff is on forbearance). Significantly, and as predicted when the broadband scheme was first introduced, the entry level tariff plans formed the bulk of the uptake but over time, the higher value tariff plans offered by the USP in parallel gained popularity. As on April 2012, entry level packages constituted 32% of the total broadband subscriptions under the scheme whereas initially their share was up to 90%. Thus, the decision to discount tariffs is always a considered one based on the characteristics of the market and the gap that we need to address.

In each USOF scheme, the benchmark subsidy is modeled on the basis of projections of CAPEX, OPEX, estimated demand and paying capacity of subscribers separately for each bidding unit. This could be a state, selected individual districts, group of districts etc.The tariff assumptions/prescriptions form part of the subsidy model and benchmarking exercise.

ITU's ICTs Regulation Toolkit explains this approach in terms of 'Smart Subsidy':


‘A  smart subsidy is the term used to describe an initial subsidy (usually given on a once-only basis) that is designed to be results-oriented, does not distort the market, and encourages cost minimization and growth of the market. It helps to kick start a project or service, with the ultimate objective of the programme becoming commercially viable, whereas without the subsidy investors might otherwise have been reluctant to invest. Investors’ reluctance could be due to perceived risk or general lack of capital for the kind of service opportunities that are considered by government to be essential for socio-economic development. The important element of the smart subsidy zone is that an initial subsidy to private sector providers will make the project commercially viable on an ongoing basis by filling the financial gap with a one-time subsidy, which increases the operator’s rate of return and reduces his risk. No further subsidies are needed if the service targets are set realistically, with medium term commercial viability in view. Targeted interventions are usually implemented using a Universal Access and Service Fund (UASF).’

Broadband Networks through the Infrastructure Sharing Route

I had mentioned earlier that we should perhaps be concerned about the current trend of state funding for broadband roll outs. It is often presumed that private sector will not roll out high capacity Optic Fibre Cable (OFC) networks at the speed or with the spread required for desired levels of broadband penetration.

It is true that private sector may need various incentives or even subsidies to venture into less lucrative markets or uneconomical areas. However, in my view, a variety of measures can be taken  that still fall short of state funding or state ownership.

The Universal Service Fund of India (USOF) had initiated two excellent schemes for the remote and relatively backward North Eastern states of Assam,  Meghalaya, Mizoram,  Tripura (N.E I Telecom Circle) and Nagaland, Manipur Arunachal Pradesh (N.E II Telecom Circle) that involve high capacity OFC backbone networks being laid out in rural areas (from district to block level) through Output Based Aid projects. These were bid out (reverse bidding) after a painstaking bench-marking exercise to arrive at the upper limit of subsidy, keeping in view possibility of renting out existing OFC from incumbent operators, apart from laying fresh cable. The resultant network is to be shared by the lowest bidder i.e. designated Universal Service Provider or Host Operator  on non-discriminatory, open access basis with other service providers. The tariff  offered by the USP has to be at a specified rate of discount vis-a-vis the Telecom Regulatory Authority's  (TRAI's) ceiling rates for leasing OFC. Discounts were worked out keeping in view capital cost subsidies, revenue projections and operating cost requirements. The bid for the states of Assam was won by the incumbent fixed line operator BSNL. However interestingly for the N.E states Railtel won the bid even without BSNL's  advantage of ownership of majority of OFC networks. There is a strong possibility that it has relied on back-end agreements for renting OFC from private operators rather than laying fresh cable to achieve its obligations in a cost effective manner. This is permitted by the USOF tender. 

The above Private Public Partnership model could have been successfully replicated for block to village level roll outs too. Given that OFC as a technology/broadband platform is here to stay, adeqaute subsidies on reverse bidding basis could have attracted private capital in many (if not all) bidding units (states/telecom circles). This model was rejected during decision making on the National Optic Fibre Network (NOFN) on the debatable grounds that bench-marking takes too long. Personal experience with the above mentioned schemes tells me that this is not correct and that the benefits of involving a large number of market players in laying of the nation's OFC backhaul far outweigh the effort involved in tendering individual bidding units.  I have mentioned earlier relying on public ownership or funding the incumbent is perhaps more attractive in the short run in terms of  relatively less time and effort required to commence roll outs. However the long term impact of monopoly ownership of even open access networks (on competition and accompanying aspects such as innovation/customer service/technological neutrality) and regulatory burden involved in ensuring open access on continuing basis, merit consideration.

It is interesting to note that Indian telecommunications players are looking at voluntary sharing of OFC networks and setting up joint ventures to invest and manage shared networks as the way forward. This may be happening only in cities and towns at present, but it is a moot point whether this trend would not have been replicated eventually in rural areas if the PPP approach to network roll out had been followed.

As of now 2.5 lakh village panchayats (local government centres) are to be connected through NOFN 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. It is hoped that the roll out is achieved on time and  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.   

Another important, not entirely unrelated development is the forthcoming creation of a Telecom Finance Corporation to provide capital to telecom operators in India at internationally competitive rates. This should give a fillip to network and service expansion and will hopefully be used to fund not only infrastructure but also content and capacity building  related projects.

USOF India

The funding position of the Indian USOF as on 1.4.2013 is available at http://www.usof.gov.in/usof-cms/usof_fundstatus.htm 

It makes me proud that the website that my USOF team and I created in 2010  has earned USOF praise for transparency in financial reporting. (See 18.6.2013 blog).  The secure embedded software which needs a log in and password allows both subsidy claim settling  field units (Controllers of Communications Accounts) and Universal Service Providers to interact with USOF Headquarters on matters of subsidy authorization and claim settlement, ensuring also that all stakeholders have access to a common MIS which is exhaustive and comprehensive. Apart from that the site is designed to be a one stop shop for information on USOF including legal and implementation aspects.

USOF India is an active Fund as can be seen from articles describing progress of NOFN and the recent Cabinet approval for towers in Left Wing Extremism(LWE) affected villages. What is also needed is a greater focus of demand driven PPPs. These require considerable effort on USOF Admiration's part to consult, collaborate and design innovative programmes /projects and to see them through. However, this is  badly needed if we are to reap the benefits of  USOF's  bigger supply side initiatives. 

Govt needs Rs 13,645 crore to meet rural broadband target

 USOF left with Rs 21,800 crore for rural telecom projects

Questioning the Efficacy of Universal Service Funds: GSMA Calls for Re-evaluation and Reduction of the Universal Service Fund Levy

The importance of ICTs for sustainable and inclusive economic development and the unacceptability of the digital divide on socio-economic, political and ethical considerations are beyond question.

The modern concept of Universal Access (UA) or Universal Service (US) implies that all citizens must be able to benefit from connectivity to Information & Communication Technologies (ICTs) regardless of their socio-economic status or location within a country. Thus US requires universal availability, affordability and accessibility of ICTs.

Governments have always tried to ensure UA/US through various means, at times even before the concept was given legal recognition. Historically in the era of copper based PSTNs, telecommunications was considered a natural monopoly and the incumbent operator was usually allowed to cross-subsidize local access (to individual residents and/or households rural areas)  from higher (monopolistic) earnings derived from the national and international long distance markets. However, with the onset of liberalization and competition, such cross-subsidies were not possible as the competitors began to undercut the incumbent who was forced to lower (monopoly) tariffs & hence profits. The concept of Access Deficit Charges (ADCs) substituted these internal cross-subsidies with inter-operator cross-subsidies as other operators were required to pay fixed/percentage based compensation to the incumbent for affordable local access. Both measures are neither transparent, nor efficient and create market distortions. Most countries have withdrawn these measures and now resort to either rural/remote area roll out obligations as a part of license conditions or rely on Universal Service Funds (USFs). While technically USFs are more transparent, targeted and efficient mechanisms to achieve UA/US and  competition neutrality is often a stated precondition for USF support, in practice their implementation has not measured up to these theoretical advantages. There are considerable variations in regulatory and implementation practices across the world though around 130-140 countries have defined UA/US requirements.

Funding for UA/ US 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 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.

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. I feel that the findings of the survey 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.

Universal Service (ICTs) -An Evolving Concept

As an opening remark, I would like to say that those familiar with the concept of Universal Service  to ICTs (US) would agree that it has undergone many changes over the past decades. From opaque cross subsidies in the era of monopolistic provision of copper based land line connectivity, through access deficit charges in liberalized regime with growing mobile revenues, to more transparent funding from Universal Service Funds, US as a concept or obligation has always been present, often even before it has gained statutory status, albeit in different avatars.

What is a bit worrisome is the current practice of using Universal Service Funds (USFs) for nationwide roll outs of Optic Fibre Backbones (OFC) without perhaps giving adequate attention to impact on competitive neutrality.  Very often the incumbent operator ends up having a major roll to play in such a scheme by virtue of ownership of the majority of the existing OFC backbone, As somebody wrote, it is as if we are going back to the future. Should we not be wary about supporting such potential monopolies without well though out strategies to avoid re-creation of monopolies, even if in the short run this appears to be the faster or more economical option for  bringing high speed broadband to rural/remote/under served  areas? I will  write more about that later.

The good side of the present avatar of US is the increasing awareness  and use of USFs for addressing the needs of disadvantaged groups such as women and the disabled and for addressing demand side gaps to ICT connectivity. The Indian USF has two such projects to its credit. The first is labeled Sanchar Shakti and is aimed at provision of mobile value added services to rural women. This is a very successful initiative.The other which did not take off is their pilot scheme for access to ICTs for disabled in rural India.
More about this later.

Here is a link about Sanchar Shakti from GSMA's Blog
http://www.gsma.com/mobilefordevelopment/innovative-use-of-universal-service-funds-sanchar-shakti-gaining-strength

Here is a link about EC updates on  National Broadband Plans
http://broadbandtrends.com/blog1/2012/04/09/european-commission-updates-on-national-broadband-plans/