Turning Universal Service Funds into Agents of Change
While research has shown conclusively that competition among service providers and diversity in technology platforms for connectivity are a major driver for telecom penetration, it would probably take a long time for the market to create enough commercial incentives to bring connectivity to high cost remote regions and low income households. The stakes are too high and the economic and social opportunity is huge to wait for the market to bring connectivity to all. The Universal Service Funds (USFs) will play a critical role to help governments address this challenge. I want to invite Governments around the world to move with an extreme sense of urgency to turn these”sleepers” into agents of change.Before the opening of competition the funding and allocation of USF was straightforward. One telecom supplier funded either by cross subsidies between difference services or government funds supported the program to provide fixed telephony service to high cost remote locations and low income households. This model continued to exist for many years with modest results in many markets, as evidenced by the poor growth in fixed line telephony penetration rates.While USF programs were implemented across the globe, most countries opened the telecom market to competition. A competitive mobile market developed and mobile penetration rates either reached or are close to reach universalization in both develop and developing markets. Therefore, even though most Universal Service programs failed to reach specific objectives, thanks to the opening and competition in the mobile market, most Governments can declare victory in connecting everyone to the voice network.The development of IP networks and the Internet radically revolutionized the value of connectivity and created an enormous new challenge. Broadband connectivity is now an integral part of the economies’ essential infrastructure, together with power, transport and water. The Universal Service Programs’ Perfect StormEvidently technology and market developments radically transformed the market fundamentals leaving the structure of USF programs obsolete. However, the importance of USF has never been as important as before.There are many challenges in the design of a USF programs today. These include not only the definition of the policy objective -no one should be invested in narrowband networks-, but also the effective collection of funds, the competitive and neutral distribution, issues such as supply vs. demand incentives, and financial debates such as allocating USF to capex vs. opex. In future blogs I am planning to explore these issues in more detail. In the mean time, I want to applaud infoDev for releasing the Universal Access and Service Module expanding the ICT Regulation Toolkit. The toolkit is a great resource for policymakers worldwide to review in the development on its USF rules.Finally it is worth to point out that USF is one tool of many policies and initiatives required to expand broadband. However it is also crucial that Governments let the market work at its full potential, letting network service providers use and put spectrum to work and removing artificial limitations that inhibit investment. The right policies together with an efficient USF program will transform these programs into powerful agents of change.