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17 May

Are Telecom Universal Service Funds outdated?

By: Namit
May 17, 2017

Universal Service or Access Funds (which go by different names in different countries) are a mechanism by which a national regulatory authority mandates, oversees and/or coordinates a set of subsidies and fees designed to promote access to telecommunication services for all of a country's population.

Though the concept dates back to The United States’ 1934 Communication Act that called for ‘rapid, efficient, nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges’ to ‘all the people of the United States,’ Telecom USFs are increasingly being employed by developing countries relatively recently to provide Universal Service and Access. Debate abounds about their efficacy for connecting the unconnected, so it’s time for analysts, scholars and government officials to consider whether they are indeed, a useful tool.

Some voices, for instance, criticize the very concept as it runs contrary to the Market Mechanism, while other criticisms are centered around the way Funds are structured and managed.

As a telecom equipment manufacturer committed to serving the underserved, VNL has had occasion to interact with various USFs across the world. Our latest Position Paper on USFs examines such criticisms, and suggests that if USFs are viewed as change agents in a dynamic sense, they can become game changers in bridging the Digital Divide.

The Paper argues

  • Whatever their particular mandates and structures, USFs need to be flexible and alive to evolving needs and technologies.
  • Given the pace of technology change and rising aspirations, USFs need to fund ever increasing digital requirements.
  • There is a case for bigger rather than smaller contributions to ensure that funds don’t fall short.
  • Funds that manage to remain agile, reap the benefits of being seen as relevant, and end up achieving their objectives.

Citing the example of USOF, the Indian USF, the Paper shows how the Fund has successfully, through the levy of a significantly high contribution from operators, managed to create a large float to finance projects relevant to specific geographies (a mobile network in India’s insurgency-affected hinterland and in remote North Eastern regions), and rural areas (a fiber-based broadband network extending up to 250,000 Block level villages), thereby giving a much needed boost to  ICT-based development goals.

Read the Position Paper now!

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