World Dialogue on Regulation

Perverse universal service

We began our research on universal access/service policy implementation (and regulation) favourably disposed. After all, I had designed and got started a scheme for subsidizing payphones in rural Sri Lanka when I was Director General of Telecom and then included a significant least-cost subsidy auction for rural networks in the e Sri Lanka initiative that I and Harsha de Silva were involved in designing in 2002-03.

Yet, the deeper we got into studying the actual operation of universal service schemes, the more disillusioned we got. The fundamental lesson that Harsha highlights in his recent op-ed piece, is that the regulatory environment must be right before subsidies are applied. It's easy enough to say this, but when projects get implemented, there is a tendency to neglect the principle and proceed with the subsidies, anyway.

Payal Malik, based on her research, showed that most of the disbursements of the Indian Universal Service Fund (the second largest in the world) went to the incumbent, with a massive 5% of the revenue of mobile operators being extracted for a fund the government has difficulty in spending. When combined with the teleuse@BOP results, we see the perversion that the poorest people are being compelled to contribute to a Fund that does not necessarily benefit them. In the course of the presentation LIRNEasia made to the leadership of the Indian Department of Telecom and the Universal Service Fund, we were asked what we thought of spending these funds on telecenters. In response I asked what they thought about reducing the universal service levy, which was now falling on the shoulders of the poor increasingly. Taxing mobile users to pay for telecenters they did not seem to want seems counter-productive, to say the least.

The TRE research that we undertook gives India, the country with the largest Universal Service Fund and the most activity in this area, the lowest scores on universal service, vis-à-vis the five countries and also the six dimensions India was scored on. The highest TRE score on universal service goes to Sri Lanka, which does not take one cent from the subscribers for universal service; and at the time of the study had not spent any of the funds accumulated from the levies on incoming international calls. Either the results are perverse or universal service policy/regulation is perverse.