Three separate zones exist within the so-called access gap, namely the market efficiency gap, the smart subsidy zone and the true access gap, as illustrated in the figure below. Each zone requires a distinctive set of policies and strategies which together yield an integrated universal access and service (UAS) programme.
There are also two dimensions to the challenge of achieving UAS: these are poverty and high-cost areas. Poverty, of course, exists in both urban and rural areas, however the cost of addressing both poverty and high-cost areas together, as exists in many rural settings, is much higher. Providing access to the urban poor is well within the reach of the market.
Figure: Distinctions within the access gap
Source: Initial concept in “Telecommunications & Information services for the Poor. Towards a Strategy for Universal Access”, by J. Navas-Sabater, A. Dymond, N. Juntunen, 2002. Modified by Intelecon.
The market efficiency gap is the gap between the service reach which can be achieved in a fully liberalized and efficient market and what is actually achieved by markets under existing conditions. This gap can be bridged through private service provision so long as the regulator and policymakers remove non-economic barriers, create enabling regulation, ensure a level playing field among all market participants and the create a positive fiscal, business and investment climate. This allows operators and service providers to be able to serve a much broader area and its inhabitants and thus close the market efficiency gap. This frontier can be reached within the context of telecommunications sector reform and does not require subsidies. Many countries are now doing very well in bridging this gap through effective competitive service provision. The only questions relate to how far the market can actually reach commercially, and how best to implement and sequence more pro-market conditions to reach the limits of the market. The theme of an effective liberalized market, together with the regulations needed to implement it, is discussed in detail in
Chapter 2.
The smart subsidy zone refers to rural or high cost areas, and low-income population groups that will not be reached by the market alone, even if it is an efficient market, or at least not for a long time to come. Targeted financial intervention beyond normal regulatory measures and incentives is required to provide services to these population groups and areas. A smart subsidy is the term used to describe an initial subsidy (usually given on a once-only basis) that is designed to be results-oriented, does not distort the market, and encourages cost minimization and growth of the market. It helps to kick start a project or service, with the ultimate objective of the programme becoming commercially viable, whereas without the subsidy investors might otherwise have been reluctant to invest. Investors’ reluctance could be due to perceived risk or general lack of capital for the kind of service opportunities that are considered by government to be essential for socio-economic development. The important element of the smart subsidy zone is that an initial subsidy to private sector providers will make the project commercially viable on an ongoing basis by filling the financial gap with a one-time subsidy, which increases the operator’s rate of return and reduces his risk. No further subsidies are needed if the service targets are set realistically, with medium term commercial viability in view. Targeted interventions are usually implemented using a Universal Access and Service Fund (UASF).
Section 5.3.8 recognizes that the extent of the smart subsidy zone is sometimes hard to predict and can be a moving target, as it is not uncommon that operators exceed expectations and close this gap.
The true access gap comprises areas or communications targets that are beyond commercial viability, even in instances where initial smart subsidies are given. Commercial sector operators or service providers serving these areas or population groups would need ongoing financial support, possibly in the form of operating subsidies (or end-user subsidies in the case of universal service [US]). It is a political decision if and to what extent to subsidize ongoing service provision to areas and population groups that are beyond the limits of the smart subsidy zone and whether or not to use UASFs to finance such operations. However, even the true access gap can sometimes be bridged with innovative commercially-related approaches. In some cases, true access gap areas can be combined with more profitable areas, without need for ongoing subsidy. Also, in most countries, the true access gap may, in fact, apply only to a small percentage of the total population.
In cases where the market is in fact achieving most UAS objectives, a degree of public oversight remains reassuring. It can make progress more visible, highlight any deficiencies and provide a safety net for unfortunate people or places not otherwise served. Constant change in technology, services, and pervasiveness of various ICT services makes it necessary that the status of UAS should be monitored and policies continue to be updated and developed.
In all cases, it is important to work with the market as it develops. This involves, for example:
- Consulting industry and the wider public on the details of UAS policy and its implementation, and taking views expressed into account, especially those that rest on practical experience;
- Ensuring that all market participants have the opportunity to contribute to UAS goals, and receive appropriate recognition when they do so;
- Reviewing policies and practices regularly to keep pace with market and technological developments; and
- Wherever practicable, incorporating competitive mechanisms into the distribution of subsidies for UAS projects.