Pakistan’s Universal Service Fund

UA funding and financing policies: tackling accessibility challenges

Pakistan established an autonomous Universal Service Fund (USF) by the end of 2006, in accordance with rules and guidelines from the Telecommunications Law enacted in July 2003, the 2004 Mobile Cellular Policy, and the 2004 Broadband Policy. It was created by the Ministry of Information Technology and Telecommunication (MoITT) with the goal of promoting the development of telecommunication services in unserved and underserved areas throughout the country. The USF follows a Corporate Model under Section 42 of the Pakistani Companies Ordinance. The main objectives of the USF are:

• to make telecommunication operators focus on the rural population and increase the level of telecommunication penetration significantly in rural areas through effective and fair utilization of the USF;
• to improve broadband penetration in the country; and,
• to improve e-services, both in rural and urban areas of the country.

Universal Service Contracts are awarded using a “negative auction.” This method implies that the bidder requesting the lowest amount of subsidy to perform each predefined contract wins said contract.

Structure

The USF structure is the first of its kind in Pakistan. The USF has an independent and diversified Board of Directors, which is balanced with four members from the government and four from the private sector. The composition of the board is as follows:

members of the board, participation of industry is an integral part of the USF. The USF also permits and encourages participation by local communities and voluntary bodies where relevant. Operators with innovative and cost-effective solutions are encouraged to participate.

Impact

The USF finances the spread of telecommunication services to unserved and underserved areas, and makes it possible for licensed operators to provide services to those areas on normal commercial terms. Covered services include basic telephony, broadband Internet, infrastructure for these services (such as fibre networks), and community telecentres. All disbursements of the USF are done through competitive bidding, encouraging full competition among participants. The USF is funded by contributions (1.5 per cent of adjusted revenues) from operators with no government funding involved.

Programmes funded by the USF include:

• Broadband for Sustainable Development Program in unserved areas, for which contracts have been signed with major telecommunication service providers in the country.
• Broadband for Unserved Urban Areas Program. This programme seeks to improve broadband penetration in second and third tier urban areas which are unserved. Special emphasis is being paid to educational institutions, whereby the subsidy winners are required to set-up computer labs with broadband in all high-schools and colleges in their respective areas. The programme also seeks to boost the provision of other e-services like e-health, e-government, and e-commerce, among others.
• Optic Fibre Connectivity to Unserved Tehsils, seeks to extend fibre networks to Tehsils (sub-divisions of Districts) to support the provision of communications services to those areas.
• Telecentres and Telemedicine Networks around the country. These projects aim to introduce and promote e-services in Pakistan, especially in areas where availability of PCs and lack of computer literacy are key factors resulting in digital gaps.
• Projects like ICTs for Girls have been running with the aim of making broadband facilities and digital services accessible for all, including women and girls.

Best practices

Several characteristics of Pakistan’s USF are aligned with success factors for UASFs (ITU 2013: 10-14; GSMA 2013: 238-240):

• Autonomy and independence: Pakistan’s USF is an independent entity and the Board of Directors is comprised of representatives from the private and public sectors. Local communities and voluntary bodies are also encouraged to participate.
• Visibility, transparency, and accountability: the USF publishes its programmes and related coverage targets, as well as ongoing status reports. USF guidelines and rules, as well as their updates, are published online.
• Fair and objective project allocation process: the USF awards subsidies using fair and transparent process based in “negative auctions” where bidders that demand the least amount in subsidies are chosen to execute the contract, and where successful bidders are published and posted online.

Monitoring and auditing

The USF is controlled and monitored by the Ministry of Information Technology and telecommunications, and is administered by an independent but wholly state-owned company.

References

GSMA. 2013. Universal Service Fund Study. London. https://www.gsma.com/publicpolicy/wp-content/uploads/2016/09/GSMA2013_Report_SurveyOfUniversalServiceFunds.pdf.

ITU (International Telecommunication Union). 2013. Universal Service Fund and Digital Inclusion for All Study. Geneva: International Telecommunication Union. https://www.itu.int/en/ITU-D/Conferences/GSR/Documents/ITU%20USF%20Final%20Report.pdf.