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.

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.