Nº 6 2013 > Global Symposium for Regulators

Universal service funds

Universal service funds Universal service funds

Addressing the missing link?

At this year’s Global Symposium for Regulators (GSR‑13) in Warsaw, Poland, one of the sessions focused on ”Maximizing the potential of universal service funds through successful administration and management — Addressing the missing link”. The session was moderated by Magdalena Gaj, President of Poland’s National Regulatory Authority Office of Electronic Communications (UKE) and Chairman of GSR‑13. Panellists were Vijayalakshmy Gupta, Member of India’s Telecom Regulatory Authority; Monehela Posholi, Chief Executive Officer, Lesotho Communications Authority; Professor Fátima Barros, Chairman of the Board of Portugal’s National Regulatory Authority for Communications (ICP — Autoridade Nacional de Comunicações — ANACOM); Eric Loeb, Vice-President, International External Affairs, AT&T; Gonzalo Ruiz Díaz, Chairman of the Board, Organismo Supervisor de Inversión privada en Telecomunicaciones (OSIPTEL), Peru; and Lynne Dorward, Head of International Affairs at Telecommunications Management Group (TMG), and author of the ITU study on universal service funds and digital inclusion for all. 

Ms Dorward presented the ITU study carried out on 69 funds, categorized by region, level of activity and the inclusion or not of broadband. Whether or not funds covered the digital inclusion of women and people with disabilities was also considered. Among the funds studied, 27 foresee broadband deployment, and an equal number envisage supporting telecentres. Approximately 26 have a very high level of activity. On the other hand, there are 18 funds that are almost totally inactive. 

The rigid underlying regulatory framework often does not allow funds to adapt to the rapidly changing environment. There is often a large discrepancy between the funds collected and those actually used, and a lack of transparency, visibility and accountability in reporting is not unusual. In some cases, there are further problems of security, or even lack of electricity.

As Ms Dorward put it ”In many cases, the funds are struggling because they don't have a clearly articulated set of policies and objectives, and that in turn also causes some challenges in terms of having appropriate management.” She stressed that ”There is a growing awareness that digital inclusion needs to be tackled much more than it is at present. And this means that all communities and targeted populations need to be included. There is a need for inclusion for persons with disabilities, women and girls, youth, children, and indigenous peoples — they all need to have access to affordable information and communication technologies to stimulate and promote social and economic development.”

In this context, connectivity of the anchor institutions, such as schools, libraries, universities, hospitals, is very important. And even though there is a growing use of telecentres, there needs to be more focus in terms of what these telecentres provide. And that includes being equipped to support persons with disabilities; providing a safe and welcoming environment for women, youth, children, girls, the elderly; providing digital literacy training; and respecting the cultural heritage of indigenous populations. So, these are some of the things that are not working well.

Critical success factors, in terms of the funds that are doing well, include a solid legal and regulatory framework, and autonomous and independent funds where all stakeholders are consulted. Other success factors are: a clear separation between universal service fund authorities and other entities, flexibility and neutrality in service provision, and transparency in project allocation. The blueprints recommend setting out a well-articulated policy, defining a clear legal and regulatory framework, creating a universal service fund that is an independent and separate entity, and ensuring a high level of transparency, visibility and accountability. It is essential to allocate funds to projects, and to adapt as new needs arise. Where funds are not being used, projects should be designed and plans drafted to make best use of the available resources. The six key principles for universal service funds are autonomy, flexibility, innovation, governance, inclusiveness and transparency.

In the discussion, speakers acknowledged that, in many countries, universal service funds exist and contributions are collected, but the money is not used. One option is to undertake pilot projects, for example to empower women and non-governmental organizations to develop local content, as has been done in India. Projects must be demand driven. 

A bottom-up approach, including consultation of all stakeholders, is the most efficient way to make a universal service fund function correctly. Joint action between the regulator and the two existing operators was the basis for a success story in Lesotho, for example. The principle of transparency must be respected, including when development agencies make their contributions in kind. 

The financing of universal service funds can be through public funds, contributions from operators, or hybrid solutions. In Portugal, it was decided that operators should contribute to a compensation fund, to avoid market distortion. The regulator has responsibility for managing the fund, and for ensuring transparency and accountability. Technological neutrality is compulsory. Consideration is now being given to including functional (not very high speed) Internet access.

 What should funds be used for — infrastructure, services, local content or training? The answer depends on the particular situation in each country. It is evident, however, that funds must be used in a practical and operational way. One of the most efficient approaches to implementing projects is to coordinate the activities of different service providers, such as electricity and road network providers. Here, infrastructure sharing is the most practicable and economic solution.

A speaker from the floor observed that there are two main players in implementing universal service funds — operators and regulators — and the budget should come from both sides. Infrastructure should be shared, and all operators should contribute to the fund. Operators that provide universal service should be refunded (from the universal service fund) for the extra costs they incur in reaching everyone. The regulator should be responsible for monitoring this mechanism. Plans differ from country to country, depending on the scope — be it for infrastructure, broadcasting or content.

In rural telecommunication projects, the most important aspect is sustainability. Projects should become self-sustaining within five years. It is also necessary to invest in the development of content to guarantee a minimum level of demand, so the health, education, commerce and services sectors, for example, should develop their own content creation projects. These different sectors should coordinate their efforts, always bearing in mind the need to respect technology neutrality.

Summing up the discussion, Ms Gaj said that universal service is an important instrument to provide consumers — especially people in rural areas, and those with low-income or disabilities — with access to basic services at reasonable prices. It is vital to adopt an appropriate concept of universal service, define a proper scope and methods of financing, and ensure flexibility in the implementation of these methods, in accordance with national and local circumstances. When setting up rules for the universal service fund, certain factors should be considered. For instance, the rules should be clear and precise, they should be technology-neutral, flexible and easy to adapt to the market; and the management of the fund should be transparent, autonomous and competitive. 

Another issue is the proper scope of universal service and inclusion of new services and applications. Everyone agrees that society is changing fast and has various needs and rights which should be addressed. Today, people need access to information, which is often a public good, essential to all forms of economic activity and good governance. Internet access gives access to information and therefore in Ms Gaj’s opinion, people today have the same right to access the Internet, as they have to water, electricity, and other facilities. These expectations should be taken into account by policy-makers and regulators.



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