GSMA seeks USF reform

The GSMA has called on regulators worldwide to stop collecting for universal service funds (USFs) and to re-evaluate their approach, after finding that current funds are sitting on a combined $11 billion (€8.3 billion) in unallocated cash.
 
A new report examining USFs in 64 countries argues that less than one eighth are fully meeting their set goals for improving access, and a full third have yet to allocate any of the money they have collected.
 
In many cases, the funds held amount to a meaningful proportion of the nation's GDP. In Vietnam and Pakistan, the USFs hold the equivalent of 0.26% of national GDP, while in India it accounts for 0.23%.
 
The report argues that regulators and governments often implement USF levies or taxes on operators without any real analysis on how much funding is needed, and continue collecting for the funds after they have enough to meet their goals.
 
For example, India has nearly $4 billion in unspent USF funds, but continues to impose a levy of 5% of an operator's revenue.
 
“Our research shows that, despite the fact that there is an ever-increasing amount of money sitting unused in these funds, governments continue to collect still more from the mobile operators,” GSMA chief regulatory officer Tom Phillips said.
 
“The situation needs urgent government review and attention, as the money collected to date far exceeds the amount that is needed to ensure universal access.”
 
The report adds that the GSMA found no evidence that USFs are an effective way to meet universal service goals. In fact, the levies may be doing the opposite, and serving to discourage commercial investments in rural areas.
 
Philipps said that USFs have become “a convenient form of taxation on the telecommunications industry,” and in most cases should be shut down. The funds collected so far should be put to their stated goal of improving access to telecom services in remote areas and to those unable to afford them.
 
The GSMA's report highlights some alternatives being explored by various governments, such as public-private partnerships to improve coverage and access, or bundling obligations to serve unprofitable areas with telecom licenses in more lucrative zones.

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