Universal Access Fund: How
does it work? How to manage it?
Rohan Samarajiva
Why universal access?
 There is a strong correlation between
ICT use and economic growth
 Effective delivery of ICT services such
as e government requires that most,
if not all, citizens have access
 ICT networks are of the greatest
utility when more people can be
reached; adding new users benefit
current users
How can universal access be
 First and best method is to allow multiple
suppliers to extend service
 This means removing barriers to competition
 Where the market will not supply in the
short term, government should identify the
 If the causes include higher costs or lower
revenues, remedies exist that will not
distort market incentives and will harness
Population, GDP & fixed
telephony shares by province
How to fund universal access?
 Good regulation costs money. This can be
obtained from general government funds
(1st best solution) or from regulatory fees
(2nd best)
 Capital cost subsidies are resource
intensive. Again, choice are government
funds (1st best) and industry levies (2nd
 Same with vouchers and other demandside subsidies
How to manage universal access
 Subsidies attract the corrupt. It is
therefore essential that strong safeguards
be built into the management of the funds
 Separating the design of the subsidy
schemes and the administration of the
funds is a good idea
 Outsourcing the management of the funds
and the audit of resultant activities is
becoming accepted as best practice
 Oversight by advisory committees with
industry representation is also good
Who should get universal access
funds (supply-side)?
 Not the incumbent, as of right
 Ideally, there should be broad eligibility for
universal access funds
 Not only the existing operators but even those
who are willing to enter the market
 There should be no ironclad relation
between who pays in, and who can receive
pay outs
 If such a relation cannot be avoided, it should be
limited to a short period after which the moneys
will go to a “challenge fund” open to a broader
Who should get universal access
funds (demand-side)?
 The whole point of demand-side
subsidies, which are difficult to
manage because of the larger
numbers involved, is targeting
 Important to have low-cost, easily
defensible criteria for selecting the
target groups and low-cost,
constrained-discretion methods for
deciding eligibility and disbursement
Why subsidies, not cross subsidies?
 Cross subsidies are easy to administer in
that the money flows within the firm itself
and all that the government has to look at
is outcome
 However, cross subsidies rarely, if ever,
yield the desired results and are anticompetitive
 Contrary to WTO regulatory reference paper
 Will attract arbitrage-based entry and create
demand for entry-policing by government
Universal access funds and
technology neutrality
 In many cases, universal access
funds are disbursed to existing
operators who use it in ways
protective of their old investments
 E.g., bias toward fixed connections over
mobile; voice over data; and circuitswitched over packet-switched
 It is possible to devise funding
mechanisms that are technology
In sum
 Let the market take the network as far as it
 Regulatory shortcomings must be remedied
 In devising subsidy schemes be attentive to
distortions of the market and opportunities
for corruption and arbitrage
 Management must be low-cost, transparent
and designed to avoid bureaucratic bloat
 Subsidy schemes should be technologically

Universal Access Fund: How does it work? How to …