Universal Service Fund Policy

1
ITU/BDT CTO Workshop on Universal Service
Policies and Funding Sanaa, Yemen, 07-09 Oct
2003

• Universal Service Fund Policy
• and Implementation
• David N. Townsend

2
Model USF Policy and Implementation
Overview

• Part I USF Policy and Implementation
• Mission and objectives
• Authorising and enabling laws and policies
• Sources of contributions
• Management and administration
• Procedures for determining funding allocations
• Project definitions and criteria

3
Model USF Policy and Implementation
Fund mission, objectives and priorities

• Overriding mission and vision
• Contribute to national economic development and
  social well-being
• Promote technological innovation in the
  telecommunications sector
• Promote competition in the telecommunications
  market
• Establish efficient, self-sustaining
  market-oriented businesses

4
Model USF Policy and Implementation
Fund mission, objectives and priorities

• Practical objectives and priorities
• Provide universal access to basic telephone
  communication
• Provide access to advanced communications
  capabilities
• Provide support for economic development and
  opportunity
• Provide direct support to public and community
  service institutions

5
Model USF Policy and Implementation
Authorising and enabling laws and policies

• All key development programs begin at a high
  level of national legislation, Presidential
  decrees, or Ministerial policy statements
• Framework to ensure credibility and consistency
  with other national policies
• Should use general language, to avoid overly
  restricting implementation of objectives

6
Model USF Policy and Implementation
Authorising and enabling laws and policies

• Define principles of the right to communications
  access
• Define objectives and obligations for national
  telecommunications development
• Mandate establishment of Universal
  Service/Development Fund
• Define responsibilities for implementing and
  administering the Fund

7
Model USF Policy and Implementation
Authorising and enabling laws and policies

• Emphasise market-oriented, non-discriminatory
  principles
• Establish enforcement and dispute resolution
  powers

8
Model USF Policy and Implementation
Sources of contributions to the Fund

• Equitable contribution by all market participants
• Fixed percentage of designated revenues
• Key questions
• Who should contribute?
• What revenues should be covered?
• Should anyone receive special treatment?

9
Model USF Policy and Implementation
Sources of contributions to the Fund

• Contribution amounts determined through
  appropriate market analysis
• Needs assessment
• Cost analysis
• Revenue/demand forecasts and fee calculations
• Limited options for in-kind alternatives to
  direct financial contributions

10
Model USF Policy and Implementation
Management and administration of the Fund

• Under control of independent telecom regulatory
  authority
• Management autonomy
• Independent budget, separate accounting

11
Model USF Policy and Implementation
Management and administration of the Fund
12
Model USF Policy and Implementation
Management and administration of the Fund

• Accounting Standards and Procedures
• Contributions
• Payments, Documentation, Certification, Audit
• Fund accounts and budgets
• Project Fund
• Operating Budget
• Reserve Fund
• Project budgets

13
Model USF Policy and Implementation
Procedures for determining funding allocations

• Operating Plan
• Intended projects and targets for planning period
  (1-2 years)
• Projects
• Activities funded by the USF
• Concessions
• Licenses, grants, awards to individual applicants
  to use Fund resources in fulfillment of a Project

14
Model USF Policy and Implementation
Procedures for determining funding allocations

• Target Objectives
• Interim targets for each category of Fund
  assistance
• Highest priority typically to basic telephone
  access
• Allocations based on relative degree of progress
  toward targets

15
Model USF Policy and Implementation
Project definitions and criteria

• 1) Universal Access to basic telephone service
• Socioeconomic Priority Criteria
• Locations where economic conditions inhibit pure
  market-based solutions
• Population with low relative income
• Population not integrated with a centre of
  development low density
• Historically disadvantaged groups
• See Part II Minimum Subsidy Auctions

16
Model USF Policy and Implementation
Project definitions and criteria

• 2) Access to advanced telecommunications and
  information services
• Priority service and technical criteria
• Bandwidth, transmission quality
• Computer facilities
• Internet, e-mail access
• Training
• Messaging services
• Broadcasting, multimedia
• Information content
• See Part III Telecentre Options and Strategies

17
Model USF Policy and Implementation
Project definitions and criteria

• 3) Economic development and small business
  support
• Priority service and technical criteria
• Full-feature telephone services, equipment (PABX,
  Call Centers, etc.)
• Business data, network services
• High speed Internet servers, web hosting
• Small business incubator assistance
• Training

18
Model USF Policy and Implementation
Project definitions and criteria

• 4) Public service institution support
• Priority service and technical criteria
• Educational, health care, government services
• Interactive, multimedia technologies, services,
  equipment
• Specialised content development programs

19
Minimum subsidy competitive auctions
Part II of Model Universal Service Fund Policies
and Procedures

• Procedures for applying USF financing to
  construct and operate new public access
  telecommunications facilities in unserved rural
  areas, based on a minimum subsidy competitive
  auction mechanism
• Focuses on public payphones as the mandatory
  designated service to be provided
• Other services may also be designated as
  mandatory

20
Minimum subsidy competitive auctions

• Based on successful experiences in Chile, Peru
  and Colombia
• Post-liberalization, no universal service
  obligations on any specific operator(s)
• Incentives vs. obligations

21
Minimum subsidy competitive auctions

• Subsidies financed by sector or general taxation
  
• All operators could compete for the subsidy
• Initially only public payphones in unserved
  areas later added telecentres with Internet
• Results to date operators used subsidies to
  leverage 2 to 6 X additional investment in
  optional services

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DNTA

• Thank You
• For more information, please contact
• David N. Townsend
• President, DNTA
• DNT_at_dntownsend.com
• 1-781-477-9356 (tel)
• 1-781-593-4707 (fax)