GSMA Calls for Re-evaluation and Reduction of the Universal Service Fund Levy

- Currently 11 Billion USD is Languishing Unused in Universal Service Funds, With 4.1 Billion USD Sitting in India's Fund Alone

NEW DELHI, April 10, 2013 /PRNewswire/ -- Following extensive research, the GSMA today called for governments and regulators to reassess their approach to Universal Service Fund (USF) levies. In a new report issued today, the GSMA concludes that most funds are not succeeding in delivering their stated goal of widening access to telecommunication services and that alternative market-based solutions are more effective.

The report estimates that more than one-third of the 64 funds surveyed have yet to disburse any of the contributions they have collected and that more than 11 billion USD remains undisbursed, money that could otherwise be used to extend rural coverage or lower the cost of mobile ownership. In India, the Universal Service Obligation Fund (USOF) continues to impose approximately a five per cent levy on operator revenues, despite the fact that is contains over 4 billion USD of accumulated funds. India is not alone as regards the collection of substantial amounts of money from the mobile industry, for example in Cote D'Ivoire and Paraguay, the USF represents in excess of 0.6 per cent of the countries' GDP.

"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. 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," said Tom Phillips, Chief Regulatory and Government Affairs Officer, GSMA. "The reality is that these funds have become a convenient form of taxation on the telecommunications industry and in the majority of cases, 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."

Key findings of the research:

• Out of the 64 funds surveyed, less than an eighth of them are achieving their targets;
• Funds are not always allocated in a competitively and technologically neutral way;
• There is no evidence that Universal Service Funds are an effective way to achieve universal service goals and in fact they may be counter-productive, as taxing commercial investors in such a way makes rural investments less likely; and
• Alternative solutions, for example private/public partnerships such as those established in Finland, have been able to deliver better and more effective outcomes.

Of all the funds surveyed globally, Colombia offers an outstanding example of best practice in the administration of USFs. The Colombian authorities have recently restructured the USF approach to reduce the burden placed on operators. They have structured it to be financially autonomous, and money for projects is granted in a highly transparent manner via a public bidding process open to all interested parties. The research reinforces the fact that market-based solutions have shown themselves to be the most effective way in bridging the 'digital divide'.

The liberalisation of markets, private sector investment and mobile operator innovation has opened up telecommunications services to a significant proportion of the global population. With the number of mobile subscribers standing at 3.2 billion, nearly half of the people in the world now use mobile communications[1]. It is expected that a further 700 million subscribers will be added by 2017 and the 4 billion-subscriber milestone will be reached in 2018.

Phillips concluded, "The GSMA calls on individual governments to implement an immediate moratorium on the collection of more money for universal service funds and to launch a re-think of their future role."

The report can be found at: www.gsma.com/publicpolicy/tax/research-and-resources.

Notes to Editor:

[1] Mobile subscriber penetration stands at 45 per cent globally, while mobile connection penetration is currently 94 per cent. The variance between the number of mobile subscribers and the number of mobile connections is related to multiple SIM ownership as well as inactive SIMs. GSMA Wireless Intelligence.

About the GSMA
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220 countries, the GSMA unites nearly 800 of the world's mobile operators with more than 230 companies in the broader mobile ecosystem, including handset makers, software companies, equipment providers and Internet companies, as well as organisations in industry sectors such as financial services, healthcare, media, transport and utilities. The GSMA also produces industry-leading events such as the Mobile World Congress and Mobile Asia Expo.

For more information, please visit the GSMA corporate website at www.gsma.com or Mobile World Live, the online portal for the mobile communications industry, at www.mobileworldlive.com