On the improvement of India’s universal-service policy environment

Posted on March 14, 2009  /  1 Comments

Two surveys of India’s telecom regulatory and policy environments conducted in 2006 and 2008 by LIRNEasia show a dramatic increase in the score for universal service policies since the policy changes effected in 2007. From being ranked lowest among six emerging Asian countries, India now has close to the highest score for universal service policy and implementation in the mobile subsector, the most dynamic and important of all. What is also noteworthy is that the 2006 score for universal service was the lowest among the six policy and regulatory dimensions that were assessed then. By 2008, that unenviable position had been passed to the dimension of management of scarce resources (spectrum). The increase in the USO score in the fixed subsector was 36 percent; and in the mobile sector 64 percent. The increase in the mobile subsector score is the highest increase that has been observed for any dimension in any country.

The TRE study had been designed and piloted in Sri Lanka in 2003-04, conducted in six Asian countries in 2006 and then also adapted for use in Africa and Latin America. The recent study was conducted in eight countries (Bangladesh, India, Indonesia, Maldives, Pakistan, the Philippines, Sri Lanka, and Thailand) in late 2008, with Afghanistan to be added shortly. In India, the study was conducted by Payal Malik of the University of Delhi and a Senior Fellow with LIRNEasia. It is a well-tested instrument that taps the perceptions of senior officials (CEO level) private sector organizations in the telecom sector, including lawyers, consultants, journalists and public-interest experts, using statistical techniques to reduce bias. The TRE is a perception-based measure, which takes less than 10 minutes to fill out, and is superior to other measures that relied on objective indicators of regulatory performance because it covered both regulatory and policy substance and process. And perception is what matters in investment decisions which are the foundation for good performance in telecom over the long term. Therefore, the TRE is a first-best methodology that draws on high-quality data and cuts to the essence of regulatory performance.

Rohan Samarajiva and Payal Malik had made a presentation on this and related research to the Indian of Telecommunications and its Universal Service Fund office in 2007. Based on their research they had predicted to the then Universal Service Fund Administrator that the score would increase following the policy changes in 2007. However, no one had expected this much of a jump. While the universal service funds were slow to be disbursed, the stakeholders were rewarding the government for being on the right path, where there was no longer any discrimination against mobile and the focus was on infrastructure.

The position occupied in 2006 at the bottom of the rankings by universal service policy was now occupied by spectrum. The Department should take heed of the considerable unhappiness being expressed about spectrum policy and implementation and take quick remedial action to ensure orderly release of spectrum to the operators so that they can continue to serve the ballooning market demand.

India continued to be ranked extremely highly with regard to regulatory performance on tariffs. The scores for both fixed and mobile sectors were 3.9 out of a maximum of 5 and were the highest among dimensions and across countries. This was also the case in 2006. The lesson is that less may be more: regulatory forbearance on tariff regulation coupled with the highest levels of competition in the world had yielded certainty for the operators and low prices for the consumers. If this lesson were extended to universal service, the government would seek to phase down the universal service levies, which now amount to a tax on poor people who use telephones that is not spent on extending service but is kept undisbursed. If the Government of India were to cut the percentage of universal service contributions and disburse the money quickly, it will see the TRE score for universal service approach that of tariff regulation in 2010.

1 Comment

  1. It is mentioned that “The recent study was conducted in eight countries (Bangladesh, India, Indonesia, Maldives, Pakistan, the Philippines, Sri Lanka, and Thailand) in late 2008”.
    Question is where can one see the overall results of all the countries named above? I am particularly interested in the study about Pakistan Universal Service perception.