Having evaluated the amount of subsidy required (as per the methodology in Section 6.2) in the various projects that make up a universal access and service (UAS) programme, one way to assess, evaluate and rank them is to identify the costs (in terms of required subsidy) per beneficiary or cost per community served. It is appropriate to make cross-country and, more importantly, internal provincial or district comparisons when evaluating UAS costs, in order to help decide how reasonable a programme appears to be.
Telephony fixed line costs
Although less relevant as a guide for UA telephony competitions today, the table in Section 3.2.1 described the cost of the universal access (UA) programmes in the three leading Latin American countries in terms of subsidy per locality for both public village telephones, telecentres and school Internet programmes.
A recent study preparing the first UA pilot project for Mongolia compared Mongolia’s costs with the Latin American examples (since the country’s geography is similar to the Latin American examples in terms of remote regions) and at least one of Mongolia’s programmes involved primarily UA in remote areas.
The table summarizes the approximate projected subsidy per person for Mongolia’s 2006 public access network deployment to remote nomadic herder areas. The expected subsidy costs per community were projected to range between USD 5,100 and USD 7,200 per station. The table shows an overall expected average of approximately USD 7.69 per person, though ranging from USD 5.28 to USD 11.86 in the various locations.
Source: Cost-benefit analysis on Mongolia OBA Pilot Program of the Universal Access Strategy, Report submitted to the Global Partnership on Output-based Aid and World Bank, January 2006, Intelecon Research & Consultancy Ltd.
These estimates compared favourably with other fixed network competitions in similarly remote and mountainous areas of the world, of which Chile and Peru were the prime examples. The Chilean competitions awarded subsidies in the range USD 2,256 to USD 12,727 per locality and between USD 2.88 and USD 45.50 per inhabitant (the first round of competition was for terrestrial wireless, while the later rounds included more satellite solutions and were comparable with Mongolia’s).
Source: Cost-benefit analysis on Mongolia OBA Pilot Program of the Universal Access Strategy, Report submitted to the Global Partnership on Output-based Aid (GPOBA) and World Bank, January 2006, Intelecon Research & Consultancy Ltd.
The following table summarizes the universal access programme of the Telecommunications Investment Fund (FITEL) in Peru. Each project had slightly different features and characteristics. FITEL summarized its projects in terms of the population served and the reduction in average access distance for the populace to reach a public telephone.
Source: Universal Access Program Assessment Report: Private sector provision of telecommunications services in rural and peri-urban areas in Peru, submitted to World Bank Public-private Advisory Facility (PPIAF), Sept 2003, Intelecon Research & Consultancy Ltd.
Overall, the Peruvian subsidies per site ranged from about USD 5,600 to USD 12,000, excluding FITEL I [1]. These values are comparable with the Chilean subsidies awarded per locality during the same period and the FITEL II and FITEL III projects illustrated the same effect as seen in Chile; the subsidy rising with time, going from more competitive to less competitive conditions and more remote, high cost and poorer areas. The FITEL IV Programme did not have the same access distance reduction effect as the earlier projects because it was designed to provide an additional public phone in locations that already had a public phone.
Mobile costs
Uganda was the first country to use competitive tendering for technology neutral solutions, won by mobile operators, through its Uganda’s Rural Communications Development Fund (RCDF). The table illustrates that the subsidy amounts in its first country-wide competition were between USD 2.64 and USD 4.29 per person served. The final competitive bids and cost per person were approximately 40 per cent below these projections. Each public access phone served approximately 2,500 inhabitants, while several thousand rural private users were also served on the same networks, which explains the much lower cost per person and illustrates the recent trend towards universal access and service (UAS) since the ascendancy of mobile.
Source: Cost-benefit analysis on Mongolia OBA Pilot Program of the Universal Access Strategy, Report submitted to the Global Partnership on Output-based Aid and World Bank, January 2006, Intelecon Research & Consultancy Ltd.
The first pilot projects of Nigeria’s Universal Service Provision Fund (USPF) also saw relatively low subsidy costs per person as shown in the following table. These costs included the provision of Internet POPs and public Internet cafés at the Local Government Authority (LGA) headquarters.
Source: Cost-benefit analysis on Mongolia OBA Pilot Program of the Universal Access Strategy, Report submitted to the Global Partnership on Output-based Aid and World Bank, January 2006, Intelecon Research & Consultancy Ltd.
Internet POP and ICT programme costs
Internet POP and public access projects in district centres which already have digital backbones serving base station towers, typically cost in the range USD 2 to USD 20 per local inhabitant.
The Uganda RCDF has implemented Internet POPs at district centres. These were designed to provide vanguard institutions (e.g., schools, colleges, hospitals, NGOs), government offices and businesses with high-speed wireless service on a commercial demand basis. The average subsidy per POP was around USD 30,000, serving a typical district centre population of 15,000. In addition, one telecentre per district is being funded to a maximum subsidy of approximately USD 25,000. The total average Internet and telecentre subsidy under the RCDF, therefore, averages USD 3 to USD 4 per inhabitant, though the most remote and sparsely populated district centres required much higher subsidies ranging up to USD 20 per inhabitant.
Initial costs for remote district centre communications in the Mongolian universal access (UA) pilot programme offered joint subsidies for mobile telephony, Internet POP, public access and free access for the school for three years. Subsidies ranged from USD 16,000 to USD 40,000 for population centres of only 1,000 people. However, from the pilot experience described in the reference documents Output-Based Aid in Mongolia: Expanding telecommunications services to rural areas and Cost-benefit analysis on Mongolia OBA Pilot Program of the Universal Access Strategy (Section 6.3.3), telephony and Internet/ICT competitions are now being bid separately, with the Internet POPs attempted only for the largest and most well-connected centres. The subsidies are expected to range between USD 40,000 to USD 80,000 per centre, i.e., ranging between USD 30 to USD 80 per inhabitant, including all Internet and ICT components.
As can be seen in all these examples above, subsidy cost per person and or per locality can vary considerably. These indicators are valuable tools to prioritize provinces or districts or projects, and help to decide how reasonable a programme appears to be.
End notes
- The FITEL 1 Project was abnormal in several respects, including government ownership of the infrastructure, and cannot be taken as either best practice or typical.