Background
A policy goal of many governments, universal service refers to telecommunications service that is available, accessible and affordable for everyone.
Several countries have established Universal Service Funds (USFs) to extend coverage to areas that are not commercially viable for the private sector. USFs are typically funded by levies on telecommunications sector revenues and the funds are disbursed either through direct subsidies or competitive bidding. USFs can also provide non-financial support to connectivity initiatives.
Despite these goals, USFs often perform poorly and countries with USFs have typically not experienced stronger internet growth. Studies by the GSMA and the International Telecommunication Union (ITU) show that disbursement rates remain very low around the world and many funds have been unable to distribute any of the levies collected.
When not administered effectively, USFs can be counterproductive. By effectively taxing telecommunications customers, services become less affordable.
Debate
What policies and processes need to be in place to ensure USF financial resources are transparent and used efficiently?
What alternative strategies can governments employ to enable the private sector to expand connectivity?
How relevant are USFs in mature markets?
Industry position
USFs should only be considered once all policy and regulatory measures to maximise coverage through market-driven mechanisms have been exhausted and after careful assessment of alternative mechanisms, such as coverage obligations and reverse spectrum auctions.
Reducing costs and regulatory barriers is critical to expanding mobile connectivity. Importantly, governments can help by removing sector-specific taxes, stimulating demand and developing infrastructure.
In markets where they already exist, USFs should be targeted, time-bound and managed transparently.
Alternative funding mechanisms should be considered to ensure a broad base of stakeholders contribute to USFs, not just mobile operators. The allocation of funds, in consultation with the mobile industry, should be competitive and technology-neutral, and should target projects with the greatest possible impact. USFs should have:
- Clear targets that ensure effective and timely disbursement of funds.
- Continuous evaluations, annual reporting and regular independent audits of government administration to ensure transparency in fund financing, disbursements and operations.
- Solid, clear and transparent underlying legal frameworks that support flexible services and technology neutrality.
- An independent fund structure to avoid political interference.
- Effective administration that avoids excessively bureaucratic structures or insufficient oversight.
- A thorough analysis of investment gaps and the impact of introducing levies on affordability and adoption to set appropriate USF levies.
- Consideration of a pay-or-play model by which mobile operators can choose to make a financial contribution to the USF or implement projects that meet the fund’s goals.
- Regular consultation with mobile operators to ensure investments in coverage are targeted efficiently, include operational expenditure subsidies where necessary and avoid duplication of infrastructure.
If USFs cannot be managed efficiently within a reasonable time frame, a plan should be implemented to phase them out.
Resources
The Impact of Universal Service Funds on Fixed-Broadband Deployment and Internet Adoption in Asia and the Pacific, UN ESCAP, 2016
Universal Service Funds in Africa, 2023