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Wednesday, January 17, 2007
The GSM Association (GSMA) believes that the cost of mobile networks and devices will continue to fall, enabling affordable mobile services to people on very low incomes.
In many developing countries, mobile penetration is strongly correlated with economic growth and social benefits. Governments and other stakeholders should therefore encourage the mobile industry to provide communications for all by lowering mobile-specific consumer taxes and removing regulatory bottlenecks.
Universal service funds have been adopted by governments in many developing countries, with the aim of improving access to telecommunications.
Points to Ponder
Mobile networks now cover 80% of the world's population, double the level in 2000. This can be attributed almost exclusively to by mobile operators and the liberalization of telecom markets by governments. By 2010, 90% of the world will be covered by mobile networks.
Thirty two of the 92 developing countries surveyed have set up universal service funds, which levy contributions from mobile and fixed operators, to subsidize the rollout of telecommunications networks in rural areas. The levy is typically set at 1–2% of gross or net revenues, although a minority of funds collect a considerably higher amount, with the highest being 5% of gross revenues. To date, 15 of the 32 universal service funds have collected more than $6 bn from the telecommunications industry, of which $2 bn has come from the mobile industry. The remaining 17 funds are expected to levy fees soon, or have only recently begun to do so.
Only 27% ($1.62 bn) of the $6 bn that has been collected has been redistributed to the telecommunications industry to aid network expansion. The remaining 73% remains unallocated and unspent.
Universal service funds distribution has had little impact on improving market penetration, primarily because most of the money spent (93% of the $1.6 bn) has been on extending fixed-line networks, which are relatively expensive. In comparison, only 5% or $75 mn has been allocated to mobile networks, 6 which are far more cost efficient to deploy than fixed-line networks.
Opportunities
Mobile operators could extend coverage to an additional 450 mn people (7% of the world's population) living in rural areas, if the unallocated $4.4 bn universal service funds levies were invested into mobile network rollout.
 
Universal service funds will extract a further $3.8 bn from the telecoms industry by the end of the decade. If 100% of this money was spent on increasing mobile network reach, a further 382 mn people, (6% of the world's population) would have mobile coverage.
If the unspent $4.4 bn universal service funds levies and the further $3.8 bn that will be collected between now and the end of the decade were spent on extending mobile networks, mobile coverage would be near 100% within 3.5 years. Countries collect universal service funds from the mobile industry but invest in fixed networks. It prevents the mobile industry from being able to serve less well-off consumers through the delivery of sustainable and affordable mobile services.
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Case Study: India
India's universal service funds collect an average of 5% from mobile operators' gross revenues each year, but the majority of mobile operators are excluded from receiving any of the funds. Most of the fund disbursements are allocated to the incumbent, BSNL.
 Since 2002, India's universal service funds have collected around $3 bn and have allocated less than 29% of the money. The amount retained to date is close to $2 bn and is predicted to rise still further. The mobile industry is being deprived of resources that it could otherwise use to invest in network rollout and meet universal service objectives.
Despite this, India's mobile network coverage doubled last year to reach over 60% of the population. A raft of changes to the regulatory environment supported this expansion. The introduction of a 'calling party pays' regime in 2003, for example, has had a significant impact on network rollout and service take-up, as has the further liberalization of the sector. India now has six to eight major mobile operators in all services areas. India has a mobile penetration rate of 11%, and this is growing rapidly as operators provide more affordable services. India's average pre-paid ARPU is $ 5.
The mobile sector has been held back by some of the world's highest taxes, such as 5 – 10% license fees and 2–6% spectrum fees levied on operators' adjusted gross revenues. Mobile operators also pay an access deficit charge of 1.5%, which is equivalent to approximately $750 mn annually. This fee is re-distributed to the fixed-line incumbent. India is an intensely competitive market; per minute call charges are among the lowest in the world. High duties and regulatory charges, combined with low prices means mobile operators have low free cash flows, which holds back further expansion in rural areas.
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