Chapter 5 translations
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This chapter addresses issues related to the financing of universal access and service (UAS) and of related ICT infrastructure and service development.
As explained in Chapter 3, prior to the onset of market liberalization, the traditional or administrative approach to meeting UAS objectives was to place certain universal service obligations (USOs) onto the dominant incumbent operator. If losses were incurred from the USOs, it was expected that the operator would finance them through cross-subsidization from profitable network services (e.g., long distance and international), through access deficit charges applied to other operators, or through complicated universal service compensation schemes. Donors and multilateral international financial institutions were often prepared to finance investments into rural areas which were assumed to have low or negative financial returns.
Today, this approach is unlikely to be used; in most developing countries, no one expects incumbent operators to accept USOs any more. Furthermore, since the mobile revolution, rural service expansion has become more attractive commercially, while even the broadband capabilities of mobile and new wireless technologies offer new possibilities for extended service reach.
But some form of funding has to be found to finance gaps which still exist between the market’s commercial boundaries and the targets UAS policymakers may wish to reach.
This chapter commences, in Section 5.1, with an introduction to the general trends in ICT development and UAS financing, showing the breadth of policies and measures which are either financial in nature or have a bearing on financing and investment for extension of ICT services.
The model of a mainly industry-financed Universal Access and Service Fund (UASF) using the principles of Output Based Aid (OBA) to finance investments targeted under UAS policy has become a well-known financial instrument for developing countries. As noted in Section 3.2.3, there are some legitimate and understandable concerns regarding UASFs, fuelled mostly by a few unfortunate examples. Some operators have expressed preference for alternatives, such as accepting reasonable rural build-out targets in their licence, or negotiating ex-ante specific rural universal access and service (UAS) targets with the regulator in exchange for relief from UASF levies or taxes (this is discussed in Sections 2.4.1, Section 2.4.2 and Section 2.4.3). Also, there have been concerns raised over the complexity of establishing and managing a UASF. However, negotiating fair UAS contributions for all operators, which are equitable between them and accepted as fair, is not necessarily an easy feat either.
Most of this chapter deals with the issues related to UASF mechanisms:
- Sources and market capacity in Section 5.2 considers the limits of the market place to afford and support subsidized UAS investments; and
- Institutional aspects in Section 5.3 surveys the range of issues surrounding the constitution and management of UASFs, their staffing, accountability and transparency.
Section 5.4 then discusses other (non-UASF) approaches to funding and the strategic collaborative and complementary role that other players can have in the expansion of UAS infrastructure and services.