Universal access to digital technologies and services

UA funding and financing policies: tackling accessibility challenges

UA policies cover not only connectivity, but also measures to ensure affordability and inclusion. The means by which governments, the private sector, non-governmental organizations, and international bodies can effectively and collaboratively achieve these goals directly relate to variables such as population density, income, geographical features, political and economic characteristics, and available resources, among others. Depending on features such as these, countries have followed different approaches to close access gaps. Moreover, in some cases, such as Kenya, universal access is increasingly being included as a key pillar within countries’ overarching digital strategies (Republic of Kenya 2019).

It is noteworthy that nearly 28 per cent of low-and middle-income countries either have no universal access and services fund (UASF) or do not have a UASF that is active. The remaining countries have no mechanism in place or use other mechanisms to promote UA objectives, including licence conditions, subsidies, and public-private partnerships (PPPs) (Bleeker 2019: 19).

This section reviews UA policies and funding approaches being adopted around the world.

Universal access and services funds (UASFs)

UASFs are funding mechanisms established by national governments to promote UA to telecommunication services. They provide financial incentives to telecommunication service operators to provide service in locations that would otherwise not be commercially viable (UN ESCAP 2017: 10). Traditionally, governments have allocated subsidies in service-specific ways (e.g. for fixed telephony payphone services). However, they have evolved to allow service-neutral competition (e.g. fixed or mobile), as well as technology-neutral competition for UASF subsidies.^[1] UASFs are used to support ICT/broadband programmes, including access to PCs and other digital devices, broadband Internet connections, and localized content and service. Further, the Economic Commission for Latin America and the Caribbean (ECLAC) notes that UASFs are a valuable resource that can be used to fund programmes to assist people with disabilities (PWDs) in the Caribbean, a view that is equally valid for other disadvantaged populations and in other regions (Bleeker 2019).

Generally, telecommunications service providers contribute to UASFs through levies based on a percentage of their annual operating revenues (ITU 2013: 6). However, operational and management features vary by country. In many cases, funding also derives from licensing fees, full or partial proceeds from spectrum auctions, direct contributions from government budgets, contributions from international agencies such as the World Bank, regional development banks, and so on. (ITU 2013: 6).

The shift in focus from voice services to broadband connectivity, as well as the promotion of affordability and inclusion, has been crucial for many countries. However, this has required legal and regulatory changes to give UASFs the flexibility to support initiatives and programs for implementing various broadband strategies (Alliance for Affordable Internet 2015: 17).

A review of successful UASFs demonstrates that certain capacity requirements are necessary to attain UA goals. A UASF carries many of the same functions as a financial institution, including managing large capital assets, evaluating and defining projects for investment opportunities, and providing financing to implementing contractors, whose operations must be overseen and evaluated to ensure the UASF’s resources are well spent. Some of the success factors include (ITU 2013: 10-15):

• Legal and regulatory framework: Policies and parameters that can be modified quickly and effectively to accommodate the need for a new UASF vision and respond to rapidly changing and evolving priorities. In Ghana, for example, owing its legislative flexibility, the regulator could incorporate the provision of access to electronic services including ICT, broadcasting, Internet, and multimedia service as universal services.
• Autonomy and independence: Some funds are structured to operate in a fully autonomous manner – Nigeria and Pakistan are good examples. Their funds are separate entities with boards of directors formed by representatives from the private and public sectors.
• Policy articulation and vision: Specific policies are needed to address aspects such as the UASF’s goals, allocation of resources, as well as its overall vision and activities.
• Consultation with stakeholders: This is essential since operators often have in-depth knowledge of the market and can provide valuable inputs and guidance. Additionally, consultation with stakeholders promotes transparency. For example, Ghana’s UASF includes a board of trustees with a representative from each major telecommunication operator to facilitate consultation and validation of proposed policies.
• Defined responsibilities between UASF and government entities or external agencies: Specific guidelines or procedures are key to administrative effectiveness.
• Defined and measurable objectives: Clearly defined objectives are critical to evaluate the effectiveness of the UASF. For instance, the Colombian fund develops a four-year plan including targets, project descriptions, and projected costs of each project to measure success.
• Flexibility and neutrality in service deployment: A technology-neutral approach is necessary for the UASF to be prepared for any change, considering how fast technology and services can evolve.
• Fair and objective project allocation process: Clear and transparent criteria to assess proposed projects as well as to evaluate proposals must be adopted. A formal proposal, solicitation, and evaluation process to approve selected bids and to distribute funds is also key to success. An example of a well-publicized, competitive, and transparent bidding process can be found in Pakistan, which applies a least-cost subsidy system in which successful bidders are posted on a website and in publications.
• Capacity building, sustainability, and complementary services: In addition to providing basic telecommunications infrastructure and services, some funds extend to projects such as the development of content and/or applications that have the potential to assist those requiring access to specialized telecommunications services. Indonesia, for instance, considers development of local content as one of its fund’s priorities.
• Innovation and incentives: Some funds provide incentives for efficient deployment and/or innovation and cost minimization, which require effective fund administration and project oversight. For instance, in Chile, USAF subsidies are paid in instalments dependent on project milestones/completed phases.
• Visibility, transparency, and accountability: These principles must be embedded in UASF schemes given that they administer contributions from operators and other public funding sources, requiring regular reporting of financial results. In the case of Colombia, the UASF’s financial performance is published on its website, including total levies collected, the amounts contributed to the UASF, and contributions not disbursed.
• Digital inclusion responsiveness: Some funds specifically address the requirements of target-specific vulnerable population segments, such as people with disabilities, older people, indigenous peoples, and women and girls.

Generally, countries that have UASFs usually do not comply with every success factor. Examples typically show that countries often meet only some of these factors, and UASFs have been subject to well-documented challenges. These may include the following (ITU 2013: 15-16; GSMA 2013: 261-262):

• The underlying legal framework could be inadequate for the particular UASF (e.g. it does not address specific technologies used, it requires insufficient oversight, the law or regulation is too general and requires a supporting decree).
• The UASF is not able to evolve its requirements or focus in line with consumers’ needs, given the definition of the overall objectives and the stipulated focus areas.
• Some UASFs are established without conducting substantive analysis about the necessary funding, which can result in undisbursed surpluses.
• Some UASFs are unable to develop projects utilizing the levies collected, which is usually the result of a lack of access gap evaluations and meaningful demographic surveys.
• Lack of transparency in resource assignment processes.
• Political interference could negatively affect the UASF’s performance.
• Lack of training and capacity, maintenance, power sources, and other sustainability concerns.
• Challenges related to the collection of contributions owed by operators.
• Some UASFs face legal disputes/challenges regarding use and allocation of funds, which can limit their effectiveness.

UASFs may also face structural challenges (UN ESCAP 2017: 37):

• Lack of capacity (e.g. a UASF-led project in Indonesia that was affected by a short maintenance contract).
• Unfavourable local conditions, such as geographical obstacles and security issues.
• Legal disputes on the extent to which contributions are levied.
• Lack of clarity on UASFs’ management and operations.

Moreover, UASFs are generally designed to accelerate broadband implementation in rural and remote areas. Thus, in countries with low overall Internet adoption rates, deploying broadband in rural areas could be less justifiable (UN ESCAP 2017: 37).

Effective operation of UASFs require identifying and addressing these problems.

Alternative approaches to funding broadband infrastructure

Additional funding and financing strategies to achieve UA goals are also being implemented around the world. These strategies aim to improve the economics or reduce the cost of projects aimed at deploying infrastructure to meet UA goals that may not be financially viable otherwise. For example, these may include fiscal measures such as enabling tax, tariff, import, and business regulation policies designed to reduce risks and financial burdens, and provide incentives to ICT investors and financiers.

Successful measures in getting more people online include, for example, direct device and tariff subsidies to vulnerable user groups, together with value-added tax (VAT) reductions and import duties; Wi-Fi hotspots, Internet-enabled community centres/anchor facilities; online content, apps, and services including public awareness campaigns; and ICT skills training to targeted user groups (ITU 2017: 17).

Some of the funding options include the following:

• Additional funding and financing strategies. Utilize public funding, development aid, or government initiatives and regulatory incentives to bring affordable broadband to underserved areas and population groups. For instance, ARCEP in France has implemented a “New Deal” in 2018, by which frequency licensees must comply with several obligations. These obligations include improving reception quality nationwide, and particularly in rural areas; achieving ubiquitous 4G coverage; and offering Voice over Wi-Fi solutions, among others (Arcep 2018).
• Supplementary direct government funding, or joint public and private funding. Greater capital investment may be required to connect more people to the Internet, but private capital may not have the economic incentive to invest in network infrastructure in lower income, less densely populated areas (Broadband Commission 2019: 64). Some national governments are directly funding national connectivity infrastructure, such as in the case of Indonesia. The Indonesian government supported the roll-out of a national submarine fibre optic cable network, the Palapa Ring, through a public-private partnership (PPP) scheme. Various governments are also promoting the implementation of truly innovative PPPs that are sustainable and people-centric, or are using satellites and/or balloons to extend broadband to rural areas (Broadband Commission 2019: x).
• Effective regulatory measures: Some governments aim to provide adequate regulatory policies to attract private sector investment in broadband infrastructure.
• “Pay or play” policies: Operators can either pay their financial contributions to the UASF or they may implement projects approved by the regulator. It motivates operators providing a USAF service to identify, help plan, and deliver the facilities and/or service. This is the case in Vanuatu. This approach may entail the following benefits (ITU 2013: 12):
  • Operators can participate in the design of universal service projects;
  • It is possible to see the projects to which funds are directed;
  • Operators that contribute are directly benefited by contributions; and
  • It is possible to reduce a levy that is indirectly allocated to other operators.

However, this approach may face implementation challenges and requires effective oversight from the regulator to achieve positive results.

• Tax and import duties reduction on telecommunication/ICT equipment and services: These measures can help make telecommunications products and services more affordable to more people. It could also help to promote demand and take-up (Broadband Commission 2018: 73).

Endnotes

1. See available here. ↑

References

Alliance for Affordable Internet. 2015. Universal Access and Service Funds in the Broadband Era: The Collective Investment Imperative. Washington, DC: A4AI. http://a4ai.org/wp-content/uploads/2015/03/A4AI-USAFs-2015_Final-v.2.pdf.

Arcep. 2018. Décision n° 2018-1389 de l’Autorité de régulation des communications électroniques et des postes en date du 15 novembre 2018 relative au résultat de la procédure d’attribution d’autorisations d’utilisation de fréquences dans la bande 900 MHz en France métropolitaine pour établir et exploiter un réseau radioélectrique mobile ouvert au public. Paris: Arcep. https://www.arcep.fr/uploads/tx_gsavis/18-1389.pdf.

Bleeker, Amelia. 2019. Using Universal Service Funds to Increase Access to Technology for Persons with Disabilities in the Caribbean. ECLAC Subregional Headquarters for the Caribbean, Studies and Perspectives Series No. 79(LC/TS.2019/59-LC/CAR/TS.2019/2). Santiago: Economic Commission for Latin America and the Caribbean (ECLAC). https://www.cepal.org/sites/default/files/events/files/series_79_lcarts2019_2.pdf.

Broadband Commission for Sustainable Development. 2019. The State of Broadband: Broadband as a Foundation for Sustainable Development. Geneva: International Telecommunication Union and United Nations Educational, Scientific and Cultural Organization. https://www.itu.int/dms_pub/itu-s/opb/pol/S-POL-BROADBAND.20-2019-PDF-E.pdf.

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

GSMA. 2016. Digital Inclusion and Mobile Sector Taxation in Colombia. Reforming Sector-Specific Taxes and Regulatory Fees to Drive Affordability and Investment. London: GSMA. https://www.gsma.com/publicpolicy/wp-content/uploads/2017/03/Digital-Inclusion-and-Mobile-Sector-Taxation-in-Colombia_English.pdf.

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

ITU (International Telecommunication Union). 2017. Connecting the Unconnected: Working Together to Achieve Connect 2020 Agenda Targets. Geneva: ITU. https://broadbandcommission.org/Documents/ITU_discussion-paper_Davos2017.pdf.

Republic of Kenya. 2019. Digital Economy Blueprint: Powering Kenya’s Transformation. https://www.ict.go.ke/wp-content/uploads/2019/05/Kenya-Digital-Economy-2019.pdf.

UN ESCAP (United Nations Economic and Social Commission for Asia and the Pacific). 2017. The Impact of Universal Service Funds on Fixed-Broadband Deployment and Internet Adoption in Asia and the Pacific. Bangkok: UN ESCAP. https://www.unescap.org/sites/default/files/Universal%20Access%20and%20Service%20Funds%20final.pdf.