Utilization of USF: Lessons from Pakistan

Rasheda SultanaBangladesh

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US&UA: Approach and definition

• Every individual or household can have service, using it privately • At home or increasingly, carried with the individual through wireless devices

such as mobile phones

Universal Service (US):

• Giving every person a reasonable means of access to telecommunication services on a shared basis.

• ubiquitous access to service• e.g., at a public place i.e. community or shared access

Universal Access (UA)

• Funds developed as a means of financing the implementation of universal service and universal access projects, and in particular, the delivery of telecommunications services to commercially unviable areas and persons

USF(Universal service fund)

Why to introduce USF….

Long term socio-economic benefit might make it economically efficient to subsidize pricesSocio-Economic

benefit

Policymakers may decide to subsidize ‘Merit goods’ to achieve a certain minimum standard of livingMerit good

Political factors or regional development goals may induce government to subsidize to rural or low-income regionsDevelopment

goals

Broadband the next big thing of IT & Telecom revolution

For every 10% increase in the penetration of broadband services, there is an increase in economic growth of 1.3% points

(World Bank , 2009)

The growth effect of BB is significant and stronger in developing countries than in developed economies

In p

erce

ntag

e

Digital divide: global scenario Penetration Fixed telephone lines

2006 2007 2008 2009 2010 2011*

Developed 46.5 44.8 44.5 42.7 41.6 …Developing 13.0 13.0 12.8 12.4 11.9 …World 19.2 18.8 18.6 17.8 17.2 16.6 Mobile cellular subscriptionsDeveloped 92.9 102.0 108.5 113.2 114.2 …Developing 30.2 39.1 49.1 58.4 70.1 …World 41.8 50.6 59.9 68.3 78.0 86.4 Active mobile broadband subscriptions

Developed … 18.5 27.4 34.0 46.2 …Developing … 0.8 1.6 2.0 5.3 …World … 4.0 6.3 7.8 12.6 17.0 Internet users Developed 53.5 59.1 61.3 64.7 68.8 …Developing 9.4 12.0 15.0 18.5 21.1 …World 17.5 20.6 23.4 26.5 29.7 34.7 Fixed (wired) broadband subscriptions

Developed 15.5 18.3 20.6 22.3 23.6 …Developing 1.8 2.3 2.9 3.5 4.2 …World 4.3 5.3 6.1 6.9 7.6 8.5

Source: ITU 20115

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Global USF: funding, utilization and administration

Fund source•Over 120 countries have UAS policy•64+ countries have some form of USF•Levies on operators are main source of funding (levies ranges from <1% to 6%)

Utilization of funds•UAS programme planning and implementation too slow – overtaken by market development•No fund has been capable of distributing more than 1-2% of sector revenue

Administration of funds•Over 70% are managed either by NRA or Concerned ministry

Fund Administrator Percentage Regulator 59.6

Ministry 13.5

Independent Agency 19.2

Other 7.7

Total 100

Country % contribution by operators

Malaysia 6Colombia, India, Zambia 5% USA <4% (plus state levies)Thailand 4%Algeria, Bolivia 3%Afghanistan 2.5%Russia, Burkina Fasso, Dominican Republic, Cote D’Ivoire, Dominican republic, Gabon, Madagascar, Mongolia, Morocco, Nicaragua, Nepal, Rwanda, Togo, Zimbabwe

2%

Canada 1.5% (plus federal contributions)

Belarus, Pakistan 1.5%Russia 1.2%Uganda, Nigeria, Argentina, Brazil, Ecuador, Czech Republic, Ghana, Venezuela , Malawi, Ecuador, Mozambique, Peru, Saudi Arabia, Turkey

1%

Bulgaria, Estonia, South Africa, Estonia, Hungary, Paraguay, Poland, Romania, Swaziland

<1%

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The biggest and brightest USFs Brazil Chile India Malaysia Pakistan

Name of Fund FUST FDT USOF USPF USF

Year of formation

2000 1994 2002 1998 2007

Source of fund 1% levy on operators

Government’s budget 5% levy on operators

6% levy on operators

1.5% levy on operators

Administrator NRA NRA Ministry of IT NRA Independent Agency

Year(s) in operation

11 yrs 17 yrs 9 yrs 13 yrs 4 yrs

Amount collected

(cumulative)

USD5.78bn - USD 8.2 Bn USD 796.8mn USD 255mn

Amount disbursed

(cumulative )

USD 4.5mn - USD 2.9 Bn USD 45.97mn USD 162mn

Utilization rate <1% ≥54%(as of 2006)

≥37%(as of FY 2010-

11)

≥5.76%(as of 2008)

≥63.63%(as of FY2009-10)

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What made Pakistan different

Governance model•Independent board•Diversified with equal representation from Public and Private sector

1Low tax•Manageable USF•Coordinate strategy processes

2

Expertise•Possess the right set of people, capacity and expertise for implementation • Focuses on resources, processes, people etc

4Fund allocationProcess•Competitive •Transparent

3

ENABLERSSTRATEGY

Independence from NRA and Government

Vision/ perspective

Proficient leadership

Competence and resources

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Challenges ahead

Challenges from political regime

More expensive than the traditional model

• as administrative expense gets higher for establishment and management overheads

Complex coordination between Public and Private sector

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Recommendation

Mandate, Modality and Programs

• The mandate, modality and programs undertaken by USF should be revisited periodically, to assess the effectiveness and need of the USF.

Private Sector Participation

• Private sector participation/ representation must be ensured in governance model/ management of USF to ensure effective and balanced approach.

Monitoring the Progress of Programs

• The progress of programs and projects under USF should be measured, monitored and evaluated periodically to ensure transparency credibility and performance of USF implementer.

Separate entity for Supervision

• For better utilization and supervision of funds a separate company can be more effective than regulator/ govt. agency

Conditions for discontinuation

and reduced levy• In case of long

hibernation, symmetric rural-urban expansion and efficient/competitive market; USF can be discontinued, so that the operators’ contribution can be utilized in expansion

Questions

THANK YOU