Universal Service Fund Policy and Implementation David N. Townsend

1. CoE/ARB ITU/BDT & CTO Workshop on Universal Service Policies and Funding Sana’a, Yemen, 07-09 Oct 2003 Universal Service Fund Policy and Implementation David N. Townsend

2. Model USF Policy and Implementation Overview • Part I: USF Policy and Implementation • Mission and objectives • Authorising and enabling laws and policies • Sources of contributions • Management and administration • Procedures for determining funding allocations • Project definitions and criteria

3. Model USF Policy and Implementation Fund mission, objectives and priorities • Overriding mission and vision: • Contribute to national economic development and social well-being • Promote technological innovation in the telecommunications sector • Promote competition in the telecommunications market • Establish efficient, self-sustaining market-oriented businesses

4. Model USF Policy and Implementation Fund mission, objectives and priorities • Practical objectives and priorities: • Provide universal access to basic telephone communication • Provide access to advanced communications capabilities • Provide support for economic development and opportunity • Provide direct support to public and community service institutions

5. Model USF Policy and Implementation Authorising and enabling laws and policies • All key development programs begin at a high level of national legislation, Presidential decrees, or Ministerial policy statements • Framework to ensure credibility and consistency with other national policies • Should use general language, to avoid overly restricting implementation of objectives

6. Model USF Policy and Implementation Authorising and enabling laws and policies • Define principles of the right to communications access • Define objectives and obligations for national telecommunications development • Mandate establishment of Universal Service/Development Fund • Define responsibilities for implementing and administering the Fund

7. Model USF Policy and Implementation Authorising and enabling laws and policies • Emphasise market-oriented, non-discriminatory principles • Establish enforcement and dispute resolution powers

8. Model USF Policy and Implementation Sources of contributions to the Fund • Equitable contribution by all market participants • Fixed percentage of designated revenues • Key questions: • Who should contribute? • What revenues should be covered? • Should anyone receive special treatment?

9. Model USF Policy and Implementation Sources of contributions to the Fund • Contribution amounts determined through appropriate market analysis • Needs assessment • Cost analysis • Revenue/demand forecasts and fee calculations • Limited options for “in-kind” alternatives to direct financial contributions

10. Model USF Policy and Implementation Management and administration of the Fund • Under control of independent telecom regulatory authority • Management autonomy • Independent budget, separate accounting

11. Regulatory Agency Board of Directors (Commissioners) Fund Advisory Committee Universal Service Fund Regulatory Agency Management Fund Director Economics Division Assist. Director Accounting, Legal Project Managers Accounting, Legal Model USF Policy and Implementation Management and administration of the Fund

12. Model USF Policy and Implementation Management and administration of the Fund • Accounting Standards and Procedures: • Contributions • Payments, Documentation, Certification, Audit • Fund accounts and budgets • Project Fund • Operating Budget • Reserve Fund • Project budgets

13. Model USF Policy and Implementation Procedures for determining funding allocations • Operating Plan • Intended projects and targets for planning period (1-2 years) • Projects • Activities funded by the USF • Concessions • Licenses, grants, awards to individual applicants to use Fund resources in fulfillment of a Project

14. Model USF Policy and Implementation Procedures for determining funding allocations • Target Objectives • Interim targets for each category of Fund assistance • Highest priority typically to basic telephone access • Allocations based on relative degree of progress toward targets

15. Model USF Policy and Implementation Project definitions and criteria • 1) Universal Access to basic telephone service • Socioeconomic Priority Criteria: • Locations where economic conditions inhibit pure market-based solutions • Population with low relative income • Population not integrated with a centre of development; low density • Historically disadvantaged groups • See Part II: Minimum Subsidy Auctions

16. Model USF Policy and Implementation Project definitions and criteria • 2) Access to advanced telecommunications and information services • Priority service and technical criteria: • Bandwidth, transmission quality • Computer facilities • Internet, e-mail access • Training • Messaging services • Broadcasting, multimedia • Information content • See Part III: Telecentre Options and Strategies

17. Model USF Policy and Implementation Project definitions and criteria • 3) Economic development and small business support • Priority service and technical criteria: • Full-feature telephone services, equipment (PABX, Call Centers, etc.) • Business data, network services • High speed Internet; servers, web hosting • Small business incubator assistance • Training

18. Model USF Policy and Implementation Project definitions and criteria • 4) Public service institution support • Priority service and technical criteria: • Educational, health care, government services • Interactive, multimedia technologies, services, equipment • Specialised content development programs

19. Minimum subsidy competitive auctions Part II of Model Universal Service Fund Policies and Procedures • Procedures for applying USF financing to construct and operate new public access telecommunications facilities in unserved rural areas, based on a minimum subsidy competitive auction mechanism • Focuses on public payphones as the “mandatory” designated service to be provided • Other services may also be designated as “mandatory”

20. Minimum subsidy competitive auctions • Based on successful experiences in Chile, Peru and Colombia • Post-liberalization, no universal service obligations on any specific operator(s) • Incentives vs. obligations

21. Minimum subsidy competitive auctions • Subsidies financed by sector or general taxation; • All operators could compete for the subsidy • Initially only public payphones in unserved areas; later added telecentres with Internet • Results to date: operators used subsidies to leverage 2 to 6 X additional investment in optional services

22. DNTA Thank You For more information, please contact: David N. Townsend President, DNTA DNT@dntownsend.com +1-781-477-9356 (tel) +1-781-593-4707 (fax)