Red tape leaves USFs unallocated

04 Nov 2006

Developing markets with 'universal service funds' intended to pay for telecoms rollouts have collected $6 billion to date, but only $1.6 billion has actually been allocated, according to a new study released Tuesday.

The study, conducted by Intelecon and commissioned by the GSM Association, found that just over a third of the 92 developing markets covered have set up USF programs that require operators to pay a certain percentage of gross revenues to the government for telecoms development in unserved areas. But of the $6 billion in USF fees collected worldwide, 73% remains unallocated.

What's more, says Tom Phillips, the GSMA's chief government and regulatory affairs officer, the money that has been allocated has gone mainly to costly fixed-line rollouts rather than more efficient mobile deployments.

'Despite the fact that USFs have collected $2 billion from mobile operators, only $75 million has been allocated to mobile projects,' Phillips said at a press conference last month at the 3GSM World Congress Asia in Singapore. 'In some markets, like India, mobile operators aren't even allowed to bid for USF projects.'

That makes even less sense when considering that the cost of deploying mobile in a rural area is about ten times less than the cost to roll out fixed-line, Phillips added.

The GSMA study estimates that 80% of the world's population lives within range of a mobile network. That number is expected to reach 90% by the end of the decade, but could conceivably reach 100% by then if developing markets spent more USF money on mobile.

The problem, Phillips said, is that too many USFs were 'set up as part of the old legacy system that was designed for dealing with fixed-line monopolies. It doesn't work for mobile.'

Complicating matters further is the bureaucracy inherent in many developing market governments. 'Most of the USF money hasn't been spent because the amount of bureaucracy and red tape you have to go through to distribute it is debilitating,' he told Telecom Asia.

Phillips called on governments with USFs to reform their programs, allocate the remaining $4.4 billion now, and allocate it to lowest-cost technology. He also called on governments to take a holistic approach to USF and avoid 'double dipping' by spending USF funds for development and then specifically taxing usage.

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