GSMA: $11bn for 'universal service' UNSPENT, nations' poor still not connected

Mobile operator mouthpiece GSMA is asking countries to re-examine their universal service funding, pointing out that India alone has stockpiled $4.1bn in unspent cash while the poor remain disconnected.

Universal Service Funds are financed with a levy on network operators, both fixed and mobile, and are intended to cover the cost of delivering connectivity to those unable to otherwise afford it. In an exhaustive report (PDF, 333 pages, 9.9MB, yet surprisingly navigable) the GSMA contends that of the 64 funds it looked at:

• fewer than eight had achieved their targets;
• a third hadn't handed out any money at all, and;
• between them there was $11bn sloshing around unused.

Universal connectivity is, generally, considered a good thing. In the UK our former monopoly operator, BT, has a Universal Service obligation which requires it to provide voice service across the UK even when it's not profitable to do so, while the 4G auctions imposed a coverage obligation on one of the bands sold (which ended up with Telefonica).

Most European countries work much the same way, though the Czech Republic and Italy both apply operator levies to fund services.

But where there's no dominant player, such as the Americas, India and the Middle East, the idea is that those operating fixed and/or mobile networks should contribute a percentage of their revenue towards extending coverage, the money then being doled out by a government-appointed body... or not, as the case may be.

India, for example, collects five per cent of operator revenues and seemingly uses that cash for nothing more than stuffing government mattresses. According to the GSMA the country has $4.1bn in the bank, waiting to be dispersed.

Smaller countries are equally reticent to hand out the collected cash. Cote D’Ivoire and Paraguay apparently have 0.6 per cent of their respective GDPs stashed away should the poor need it.

Globally, across the 64 schemes the GSMA examined, there's $11bn knocking around, though it's hard to imagine it's not been spent on other things, which is rather the GSMA's point:

"The reality is that these funds have become a convenient form of taxation," says the body's rep.

Optimistically asking these unofficial tax-collectors to splurge their dosh before they're killed off, the rep continued: "They should be closed down and the balance of monies held used to extend access to mobile services to those unable to afford them, or those groups that live in particularly remote areas.

Only Colombia rates highly in the GSMA's eyes, mainly because it only asks for 2.2 per cent of operator revenue, but also because the cash goes to an independent body which runs open bidding for connectivity contracts - thus allowing operators to claw their money back.

The USA, whose fund covers landline connections and provides "lifeline" mobiles to families in need, collects 15.5 per cent of US operators' revenues, which is almost three times the 5.7 per cent it asked for in 2002. It is currently being reformed to include broadband provision as well as voice (something still lacking from BT's Universal Service obligation).

The GSMA didn't find any spare money knocking around the US, but it does cite reports of inefficiencies, including individual connections costing $2,000 a month, and projects being replicated across departments.

Universal service is a good thing, particularly when lack of connectivity can drive one out of the economy entirely, but paying for it is always going to be controversial. The GSMA knows operators won't get any sympathy complaining about the amount they give to connect poor people, so attacking the governments instead makes political sense.

It certainly seems that in many countries the levy has become taxation by another name and that can't be right. ®