USF


Mustafa Jabbar, the newly appointed minister for the Ministry of Posts, Telecommunications and Information Technology, cannot waste much time on receiving bouquets and greetings. Prime minister Sheikh Hasina has offloaded this portfolio on him after unceremoniously ejecting her veteran comrade in October 2014. Since then Hasina had been minding this ministry besides discharging her prime ministerial duties. She depended on two junior ministers – Zunaid Ahmed Palak for Information Technology and Tarana Halim for Posts and Telecommunications – to run the show. It had been a poor show and Jabbar must fix it.
Better late than never. Why it took multiple decades after the establishment of the Universal Service Fund to spend the money to connect the unconnected in India’s North East is the question. It’s not that there was a shortage of money. Bharti Airtel Ltd will set up 2,000 mobile towers across villages and national highways in the North East with the help of government funding, the company said in a press statement on Sunday. The telecom operator has signed an agreement with the department of telecommunications and the Universal Service Obligation Fund (USOF) to provide mobile services in 2,100 villages across Assam, Manipur, Mizoram, Nagaland, Sikkim, Tripura and Arunachal Pradesh over the next 18 months.
Research first presented at the CPRsouth conference in Yangon in September 2017 was cited by LIRNEasia's senior policy fellow Abu Saeed Khan in a presentation made to senior government officials, environmental officers, mobile operators and academics of the Kingdom of Bhutan.
Yesterday, I presented at CPRsouth 2017 a policy brief on the disbursement efficacy of universal service funds. We presented two relatively easy to develop metrics (year-on-year disbursement rate and cumulative disbursement rate) and applied them to four countries, India, Malaysia, Pakistan and Sri Lanka. The conclusion was that irrespective of country and irrespective of political and administrative leadership, the funds failed to get the money out. In India, for example, USD 10 billion had accumulated in the fund by 2016 taken out of a highly competitive sector and making no contribution to connecting the unconnected. We pointed out that any tax or levy imposed on an operator that is a regular payment is passed on to customers and serves to depress demand.
I thought that the Government of India finally solved the problem of getting rid of the universal service fund money that kept coming in. Sam Pitroda gave them the solution with NOFN, that was supposed to shift the money to BSNL and other government entities. And the money was given for little result. But the inflows were just too much. Now the accumulated balance is over USD 6 billion.
It started with the infamous “SIM tax” in 2005. Although mobile covers nearly 100% of population and geography, a highly ambiguous Social Obligation Fund (SOF) was created in 2010. Consequently the telecom regulator has been illegally amassing huge wealth since 2011. Now the tax authorities have decided to impose 1% surcharge on mobile usage to “promote rural education.” And for the first time, the taxmen will be collecting a sector-specific toll.
Pakistan’s Supreme Court has demanded a legal and constitutional explanation from the Attorney General (AG) for withdrawing around PKR70 billion (US$705 million) from the universal service fund (USF). The USF comes from all mobile operators’ 1.5% of gross revenue. This entire fund is intended to be used to finance the expansion of telecoms services to underserved areas. Pakistan government has, however, forked out money from USF to meet its operating expenses, claiming that the funds would be replaced when and if required.
While renewing the 2G mobile licenses in November 2011, the authorities had mandated that each mobile operator pays 1% of gross revenue to Social Obligation Fund (SOF). It is just a version of Universal Service Fund. By far four out of six operators have paid Tk. 2.4 billion (US$31 million) to Bangladesh Telecommunication Regulatory Commission, according to press report.
Pervez Ifthikar is a passionate commentator on telecom issues in Pakistan. A knowledgeable commentator and as the founding CEO of the universal service fund (one of the best in the world in his time), one who has to be taken seriously. Irrespective of the on-going, completely unnecessary, “controversy” surrounding auction of 3G in Pakistan, allotting 3G frequencies to telecom operators is extremely urgent and essential for Pakistan. We have already been left behind by others who used to be our followers in 2G. Mobile broadband – or 3G – should have been introduced here already four years ago.
Interesting post on the procurement practices of the Pakistan USF Company by its CEO: ONE OF THE BIGGEST CHALLENGES I face is to convince some of those who matter that it is possible to deal in Billions WITHOUT ANY CORRUPTION. I don’t blame them. Corruption has become so pervasive that if and when it is absent, one tends to disbelieve! So what does one do? It is said that transparency helps.
Since 2004, India has been behind Pakistan on a key indicator: mobile SIMs/100. Few in India wanted to talk about this. But we did. Now finally, India has pulled ahead, as it should. I discuss the reasons in a recent piece done for Pioneer.
An article written by Rohan Samarajiva on Bangladesh’s proposed universal service taxes has been published in The Daily Star, Bangladesh; an excerpt follows. Bangladesh currently has the lowest mobile prices in the world and perhaps the world’s highest mobile growth rate. Pretty good, by any measure. A universal service tax can ruin the business model that has given millions of Bangladesh citizens the opportunity to get connected to an electronic network for the first time and to use telecom services at affordable prices. Instead of solving a problem, it will create one.