In DepthSoapboxMobile technology: Time to rethink Universal Service Funds


Posted on Thursday, 14 November 2013 14:47

Mobile technology: Time to rethink Universal Service Funds

Mani Manimohan, Director for public policy, GSMA. Photo©Ben PhilliPsThe mobile sector in Africa has witnessed unprecedented growth in recent years.


Investments by mobile operators will have connected more than 400 million consumers by the end of the year.

Nonetheless, significant segments of the population remain unconnected, and internet penetration is lower than in other emerging economies.

User penetration, which discounts the use of multiple subscriptions, lags behind at 35%. Low incomes, weak infrastructure (e.g. electricity and roads), dispersed population clusters and a lack of regulatory certainty are impediments to further growth.

Phones are a necessity and not a luxury. Their increased adoption benefits societies and economies. All of us should work towards achieving widened access to mobile services.

It is a noble goal. But, have universal service funds (USFs) made a remarkable difference and are they the right tool?

Several African countries have established USFs, borne out of a desire to connect the unconnected. These funds are intended to offer incentives for operators to provide connectivity in hard-to-reach areas.

Irrespective of the well-intended objectives, several questions have been raised about the effectiveness and efficiency of such funds.

Lack of transparency, accountability and proportionality are some of these issues. USFs are typically funded through levies on operators.

These levies continue to be collected at arbitrarily set rates that appear to be in excess of actual needs. This is despite the accumulation of large amounts of money and growth in mobile connections.

An April 2013 study by the GSMA, an association of mobile operators, surveyed 64 USFs and found $11bn waiting to be disbursed between them.

Out of 21 funds in Africa with an estimated $727m available in 2010-2011, only $182m had been distributed.

Affordability, skills shortages and a lack of relevant content also hinder mobile adoption, yet they are ignored by policy- makers.

High taxation on mobile telephony is an example of this inconsistency. High taxes have the most stifling impact on low-income consumers, who represent the greatest opportunity.

Universal access will not be achieved by redirecting private sector funds into unsustainable infrastructure projects.

A more effective approach shifts away from large network building projects to making mobile relevant and affordable.

Stimulating demand for mobile services and creating a climate conducive to investments is the best way forward.

While infrastructure is important, by itself it will not lead to increased mobile usage.

Enabling services such as mobile money and mobile agriculture services that are directly relevant to rural consumers might help to overcome the adoption barrier.

While rural penetration lags behind, it is nevertheless increasing. Public and private sectors working together can accelerate this growth.

It is not proper to place the burden of universal service on operators alone by taxing them.

Governments should re-think the relevance of USFs and prioritise alignment of wider economic policies with the digital growth agenda. ●

Mani Manimohan is Director for public policy, GSMA


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