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Universal Service A Review

By: Kolubahzizi T. Howard

Introduction
Economic regulation is a policy instrument dependent upon objectives set by governments on the basis of its priorities and commitments to the electorate. The use of regulations seeks to ensure that those objectives are achieved when the market itself will not bring them about. It therefore becomes incumbent upon governments to seek to influence the outcome of a competitive market through a regulatory process.1 It is generally accepted that access to electronic communications can facilitate the capabilities for human development and provide a framework for the application of tools and techniques for development.2 The concept of universal service (US), access to affordable electronic communications networks and services for all citizens, is one such policy objective that can only be achieved through regulatory intervention. Especially for rural, remote, disabled and low-income population segments where a combination of public and private sector cooperation is required to address the market efficiency gaps for the delivery of electronic communications networks and services.3 Where policy makers consider a utility to be indispensable for inclusive development and social cohesion it is removed from the competitive process and supplied at an affordable price. US then become an "inderogable public factor in the process of liberalization and functions in an uncompetitive fashion because normal competition rules would exclude the achievement of specific social objectives.4 Information and communication technologies (ICTs) delivered by electronic communications networks and services cut across all economic sectors and are a pillar of modern society which directly impacts governance, education, health and economic transactions.5 The steam engine, electricity, and ICTs are acknowledged amongst the most important general purpose technologies (GPT) because of the: wide scope for improvement and elaboration; easy applicability across a wide range of uses; potential usages in a wide variety of products and processes; and, strong complementarities with existing or potential new technologies.6

A broad consensus exists that ICTs have significant impacts on national social and economic progress because of their easy application to major
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Corry et al (1994) Hamel, Jean-Yves (2010) AkueKpakpo and Msimang, (2005) Section 1 De Minico G. (2011) ICT Regulation Toolkit, Module 4. Universal Access and Service, Introduction Vu, K (2004)

problems of development.7 ICTs help countries address a range of health, economic and social problems and assist in achieving MDGs8. Additionally, Internet access provided by ICTs allows individuals to express ideas and opinions globally and provides access to new ideas, opinions and information than previously possible. A connection is seen between human rights and the Internet as a democratizing medium uniquely suited to promote human rights by enabling coordination of action, establishment of contacts, exposing of human rights violations, soliciting action, and gathering information.9 The freedom of expression, assembly and association online has been termed the freedom to connect.10 The introduction of competition in liberalized markets and the acknowledgement of access to ICTs as an important human right raised key questions of how to achieve US, what the cost would and who would bear the costs Within the regulatory framework of the European Union (EU), the concept of US encompasses the provision of a defined minimum set of services to all end-users and the provision of some services to some individuals outside the normal market transactions.11 It is recognized that US is an evolving concept driven by technological advances, market developments and changes in user demand.12 The fundamental US requirement is the provision, upon request, of a narrowband connection to the public network at a fixed location regardless of geographic location and at an affordable price in keeping with specific national conditions.13 For continued regional competitiveness, US is based on the principle that all users must have easy access to network based services.14 Within the Economic Community of West African States (ECOWAS) and other developing nations, the emphasis is on universal access (UA) with US being a long-term goal. Universal access implies the provision of community access to a publicly available telephone, which can be through payphones, telecenters, multipurpose community centers or entrepreneurs marketing mobile phone service.15 Given the lack of adequate infrastructure in developing nations to ensure connectivity of all households, UA is a step towards US which strives to increase access to electronic communications networks and facilities through the balanced distribution of points of access throughout communities.16 This, it is anticipated, will result in universal geographical coverage and ultimately universal service.
7 8

United Nations (April 2004) Government of the United Kingdom (2006) 9 Center for Democracy and Technology (2000, January 5) 10 Clinton, Hillary R. ( 2011) 11 Universal Service Directive 2002/22/EC Recital 4 12 Open Network Provision (ONP) Directive 98/10/EC Recital 1 13 USD 2002/22/EC Recital 8 14 European Commission (1994) C0M(94) 440, Preface 15 AkueKpakpo and Msimang, (2005) Section 1 16 ICT Regulation Toolkit, Module 4. Universal Access and Service, Introduction

Mobile technology in the developing world has extended services and lowered barriers to take up leading many developing countries to focusing on achieving US in urban areas while maintaining UA targets for rural areas to increase rural penetration. Some countries have achieved UA for telephony and are now focused on achieving US while targeting UA for the Internet. As such, policy objectives are on achieving both UA for the Internet and US for telephony. For developed countries which have achieved US for telephony, broadband introduction has led to a reuse of the term UA given the recognition that broadband availability may not attain US-like household penetration.17

Universal Service Goals and Targets


In the 1980s and 1990s deregulation and privatization in Britain and Europe stimulated debate about the precise definition of US and raised questions about the policy of US. The strong linkages between US and public interest drove the nationalization of major industries in the desire to provide US to all in the public interest.18 US was traditionally funded by monopoly operators through the cross-subsidization of line rentals and local call charges from high international and long distance call revenues.19 US, in this context, was not clearly defined and were seen as a public service mandate in which losses from the provision of US were to be met by subscribers in whose interest the US obligations were made.20 Liberalization and introduction of competition in the telecommunication sector generated concern among incumbent operators about being subject to competition with undertakings not subject to USOs and the potential of cream skinning by new entrants. This concern posed a major obstacle to the passage of the Telecommunications Act of 1996 in the United States until funding arrangements for US was agreed. 21 This led to the recognition that the imposition of USOs on incumbent operators alone in a competitive market stood contrary to the objectives of creating a level playing field and the need to move away from forced obligations to a system where the cost of US was proportionally shared with all undertakings having the opportunity to participate in the provision of US through a competitive mechanism.22 Market liberalisation and increased competition has driven a global telecommunications reform process. These reforms include the establishment of enabling legal and regulatory environments capable of attracting private equity investments and regional harmonization of the reforms. The reforms conform to the General Agreement on Trade and Service (GATS) and the World Trade Organizations Agreement on Basic
17 18 19 20 21 22

ICT Regulation Toolkit, Module 4. Section 1 Huntley et al (2004) Xavier, P. Dr. (2006) ITU Module 4 Section 3.1.1 Huntley et al (2004) ITU Module 4 Section 3.1.1

Telecommunications (BTA) which commit signatories to international norms and standards relating to US. The Telecommunications Services Reference Paper of 1996 entrenches regulatory reforms by establishing basic regulatory principles for competitive safeguards, interconnection, US, licensing, establishment of independent regulators and the allocation of scarce resources, all required for the implementation of US policies. Member States can define their USOs provided they are not anticompetitive per se and are administered transparently and in a nondiscriminatory and competitively neutral manner and dont create unnecessary burdens for undertakings.23 There is evidence that liberalization and increased competition under the BTA in low income Sub-Saharan African countries has led to corresponding growth in telecommunications revenues as a percentage of GDP while those without GATS commitments experience lower revenue growth.24 Principle arguments for US policies (USPs) include the following: social and economic enabling effects of ICTs which are increasingly considered a growth for economies leading to a shift of economic activity from agriculture and industry to service sectors and the information economy and society; increased supply and demand enhances the importance of USPs and fuels the requirement for US because the more ICTs are used, the more there is reliance on them, making it more imperative that all citizens have access to ICTs; despite the positive impacts of market liberalization and sector reform, market gaps still remain due to geographic characteristics, low population densities or extreme poverty, making US challenging; and, need for monitoring and reviewing US due to rapid change in technology, services and pervasiveness of ICTs, to improve regulation and continually review the concept of what is considered US.25

USPs should be elastic to adjust to specific market conditions and changing user needs with a correlation between local economic/sector conditions and US goals which should include types of access and types of services targeted. Objectives that USPs should seek to achieve include: allow full participation in the Information Society; promote efficiency, growth and economic development; encourage equal access by all population segments; promote national political, economic and cultural cohesion by integrating isolated communities into mainstream society;

23 24 25

WTO Reference Paper (1996) Section 3 ITU Module 6 Section 2.4 ITU Module 4 Section 1.3

end differences in access between rural and urban areas and differences between the information rich and the information poor; and, foster improvement in the delivery of public services. 26

US goals and priorities vary among nations. In the United States the six key US goals meant to underpin US are: 1. 2. 3. 4. quality service at an affordable rate; access by all geographic regions to advanced services; comparable service availability in rural and high cost areas; payment by all telecommunications providers of an equitable and nondiscriminatory contribution to the preservation and advancement of US; 5. maintaining specific, predictable and sufficient support mechanisms; and, 6. ensuring that schools, health care and libraries have access to advanced telecommunications services.27 The intent of these principles is to ensure that all Americans have access to advanced electronic communications services, facilities and information services that are reasonably comparable in all arrears at rates that are not substantially different.28 US in America is firmly entrenched in federal legislation29 and began as a result of the refusal of competing private networks to interconnect in the early 1900s, leading to the passage of the 1921 Willis-Graham Act exempting telephone companies from antitrust law and merging competing exchanges to unify service. Milton Mueller presents the view that US at the time meant that all telephone subscribers should be connected to each other. Competition and deregulation in the mid-1960s evolved the concept of US to a telephone in every home, financed by the regulatory manipulation of telephone rates through a system of transfer charges to make telephone service to residential and rural consumers affordable.30 Section 254 of the Telecommunications Act of 1996 establishes US and expands both the categories of undertakings contributing to the subsidization of telecom rates and the range of consumers that benefit.31 Liberalization in the UK sought to protect the provision of public service by compelling BT as a general duty to meet all reasonable demands for telephone service throughout the British Island.32 Market reforms in
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Schorr, Susan (2004) Telecommunications Act of 1996 47 U.S.C. Section 254 (b) Public Utility Commission of Oregon(2011) UM 1481 Section I Huntley et al (2004) Mueller M. (1997) Huntley et al (2004) BT Act 1981 Chapter 38 Part 1 Section 3(1)

Britain led to the formulation of a new regulatory framework for the EU based on a three-step process of: market definition to identify markets susceptible to ex-ante regulation due to entry barriers, state of competition behind barriers and the sufficiency of competition law in the absence of regulation; market analysis to determine the level of competition in identified markets; and, imposition of remedies where markets lack effective competition and an undertaking with significant market power was present.33

The EU Council of Ministers adopted a definition of US within the EU as the provision of a minimum service at specified quality to all uses based on the principles of: 1. universality - access for all, at an affordable price; 2. equality - access independent of geographical location; and, 3. continuity - continuous provision, at a defined quality.34 The definition envisioned the sharing of the cost of the provision of US through the establishment of a US Fund to which undertaking would contribute. The ECOWAS regional regulatory framework for the harmonization of ICT policies has been pursued with the support of the ITU and the EC to support the establishment of the integrated ICT market within ECOWAS through the use of international best practices and guidelines on the various regulatory aspects of ICTs.35 A series of consultations, training workshops, validation workshops and Ministerial conferences commenced in 2004 covering the regulatory aspects related to interconnection, universal access/service, licensing, numbering, and spectrum management. This led to the development of a regulatory framework designed to meet the need of Member States in a globally networked society. The regulatory framework was approved by the ECOWAS Ministers in charge of ICT/Telecommunications and signed into law as Supplementary Acts by the Thirty-First Session of the Authorities of Heads of State and Governments in 2007 to be transposed into national laws. These reforms led to the passage of telecommunications laws in all ECOWAS member States and the establishment of independent regulatory authorities. The provision for the funding of US is to be provided for in national legislation for the establishment of a US Fund to fund the net cost provision of US, along with a full range of other funding mechanisms.36
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ITU Module 6 Section 3.3.1 C0M(94) 440 Chapter VI (2) 35 AkueKpakpo and Msimang, (2005) 36 ECOWAS SUPPLEMENTARY ACT (2007) A/SA.6/01/07 ON UNIVERSAL ACCESS/SERVICE Articles 20
34

The guiding US principles within ECOWAS are to: 1. foster the introduction of innovative services via new technologies at affordable prices; 2. promotion of affordable ICT equipment by reduced tariffs and duties; 3. develop a full range of public access community options; 4. facilitate community participation in projects and content development; and, 5. promote the use of ICTs in local communities through education and training programs.37 The focus is to use electronic communications services and facilities to stimulate and support social and economic development by forming a base for, and facilitating access to, other critical development tools such as health, education and agricultural services.38

Universal Service Designation and Obligations


In the monopoly era the most common method of implementing US objectives was through license conditions specifying mandatory service obligations to prevent the artificial restriction of supply levels by public monopolies.39 In competitive markets, governments have imposed US obligations (USOs) as a regulatory intervention to ensure that US policy objectives are achieved.40 While all undertakings competitively providing public telecommunications services at fixed locations are subject to general obligations, it is envisioned that specific obligations should be imposed on undertakings with significant market power or which have been designated as a US provider (USP).41 EU Member States are authorized to determine which undertakings have responsibility to provide US. They can also designate different undertakings to provide different elements of US or provide US in different parts of the country.42 The designation must be based on objective criteria bearing in mind the ability and willingness of the undertaking to provide all or part of the obligations and users requirements for affordability, cost control and facilities.43 Designation must be conducted in an efficient, transparent and non-discriminatory manner which does not exclude any undertaking, ensures that US is provided cost effectively and can be used to calculate the net cost of providing US. This does not preclude the designation of undertakings demonstrating the most cost-effective
37 38 39 40 41 42 43

ECOWAS ACT (2007) A/SA.6/01/07 Article 6 AkueKpakpo and Msimang, (2005) Section 3.2 AkueKpakpo and Msimang, (2005) Section 4.1.1 ICT Regulation Toolkit, Module 4 Section 1.1.7 USD 2002/22/EC Recital 5 USD 2002/22/EC Article 8 ONP Directive 98/10/EC Recitals 6 and 3

service and access delivery or competitive and comparative selection procedures. 44 The US Directive (USD) defines the minimum set of services that must be provided to all end-users at affordable prices, the cost of provision of some of which may differ from normal market transactions. The services include: connection, upon request at a fixed location, to the public telephone network to access telephone services that provides functional internet access, with special tariff options for low income users; at least on comprehensive directory and at least one comprehensive directory enquiry services; public pay telephones covering national territory providing accessibility to disabled users, quality of service, and free access to EU emergency numbers; and, specific measures ensuring disabled users have access to services and facilities available to the majority of users.45 Member States can impose additional services to USOs but they cannot be financed by market players.46 Article 13 of the USD provides two types of funding mechanism for USOs where a national regulatory authority (NRA) finds (based on net cost calculations) a designated USP is subject to an unfair burden. They are: compensation from public funds of the net costs; and, a sharing mechanism among providers that is transparent, nondiscriminatory and proportionate.

Whatever funding mechanism is used, NRAs must ensure that only the USOs, and no other activities not directly linked to the provision of the USOs are financed.47 The new regulatory framework and the definition of US compelled the Office of Telecommunications (Oftel) to reexamine BTs claim that USOs placed an unfair economic burden and their request to share the costs with other operators. Oftel conducted an economic analysis of the benefits of US with regard to the benefits to users from the network effects, environmental benefits of direct communications, efficiency benefits to public services and the benefits to the educational system and isolated the cost to BT in meeting USOs. They conclusion was that costs did not justify the sharing of costs and that BT benefited as a USP and the placement of additional burdens on new entrants did not help
44 45 46 47

USD 2002/22/EC Article 8 and Recital 14 USD 2002/22/EC Articles 4 - 7 ONP Directive 98/10/EC Article 3 USD 2002/22/EC Recital 21

the competitive environment.48 Following further market analysis Kingston Communications was also designated by Ofcom as a USP with similar obligations as BT within the Hull area. This places responsibility on the two undertakings to: upon a reasonable request, provide a connection to the fixed telephone network at uniform prices and provide a connection for functional internet access; provide at least one scheme for low income consumers with special social needs; provide reasonable geographic coverage and accessibility of public call box services; provide US at geographically uniform prices; ensure that tariffs for US do not include payment for unlinked services; provide free basic level itemized billing; provide US that at defined quality thresholds; fund a relay service for textphone users; and, maintain comprehensive directories and databases and provide comprehensive directory services.49

In the United States the Communications Act of 1934 consolidated federal legislation regulating communications and transferred jurisdiction over telecommunications from the Interstate Commerce Commission to the Federal Communications Commission (FCC), but did not change existing law. The Telecommunications Act of 1996 was intended to change telecommunications regulation by removing monopolies through the promotion of effective competition by the removal of entry barriers and advancing US.50 In keeping with statutory responsibility under the Telecommunications Act 1996, the Federal-State Joint Board defined the following telecom services to be supported by the US support mechanisms:
48 49 50 51

voice grade access to the public switched network to place and receive calls; touch-tone or dual tone multi-frequency signaling (DTMF) or its functional equivalent; single-party service; access to emergency services; access to operator services; access to interexchange services; and access to directory assistance. 51

Huntley et al (2004) Xavier, P. Dr. (2006) Federal Communications Commission (1996) Recommended Decision Introduction FCC (1996) Section II B(4)

The Telecom Act (1996) allows for the designation of a common carrier as an eligible telecommunications carried to receive US support for the provision of services in its service area supported by the Federal US support mechanism, either through its own facilities or a combination of its own facilities and resale of facilities of another eligible carrier. The availability of such services and charges must be advertised.52 In this connection, USOs include the following: Lifeline (Low-income) program including initiatives for Native Americans: provides discounts for telephone services to qualifying low income end-users; High-cost program: provides funding for the provision of electronic communications in high-cost areas; Schools and Libraries program: provides affordable telecommunications services and access to educational resources for eligible schools and libraries; and, Rural Health Care program: provides discounts on the purchase of telecommunications services by eligible rural health care providers to link them to urban medical centers so patients in rural areas can access the same advanced diagnostic and other medical services enjoyed in urban communities.

These USOs are funded by the US Fund established by the Federal Communications Commission (FCC) into which service providers contribute based on an assessment of their interstate and international revenues. 53 Following the development of a harmonized regulatory framework, the USOs within the ECOWAS region include the following: connection to a telecommunication network to access telephone service capable of internet connection with an adequate transfer rate; a comprehensive directory (printed, electronic or both) and at least one comprehensive telephone information service; free access to emergency services from any telephone booth, fixed or mobile telephone; public payphones under reasonable conditions, in terms of quantity, access and geographic distribution; and, specific measures to ensure that users with disabilities or special social needs have equivalent and affordable access to publicly available telephone services, Including emergency and directory services at an affordable price.54

ECOWAS implementation measures are similar to those of the EU where undertakings can be designated as USPs on transparent, non52 53 54

Telecommunications Act 1966 Section 214(e) Federal Communications Commission, Universal Service ECOWAS Act A/SA.6/01/07 Articles 8 - 12

discriminatory and proportionate terms. USOs can be funded through direct public funding or through subsidies from the universal access fund, competitive minimum subsidy auctions or public access projects. However, funding of USOs must be transparent, non-discriminatory and competitively neutral.55 While USOs vary across countries and regions the underlying goals in all countries are to ensure that access to electronic communications networks and services are available, affordable and accessible to all citizens, especially disabled and low income earners.56

Relevance of Universal Service Obligations


The EU framers of the USD recognized that the introduction of new services driven by innovation in a competitive market would impact the concept of US57 and obligations imposed on designated USPs. Therefore, the Commission is required to institute periodic reviews on the scope and application of USOs in light of technological advances, market developments and changes in consumer demands and the necessity of maintaining obligations in light of competition.58 Market liberalization, competition and technological advances have indeed significantly impacted the electronic communications sector. Private sector investments have increased teledensity, introduced flexible pricing and lower prices, improved efficiency and quality of services and stimulated increased investment in network deployment. In developed and developing countries PSTN land-lined infrastructures are rapidly being replaced by new generation networks (NGNs) delivering high-speed integrated communications services and high-speed broadband. Wireless technology has increased availability of services in areas unserved by fixed networks at lower costs while prepaid mobile service has improved affordability and given greater control to consumers over cost. Geographic and population coverage are often included as license conditions for mobile networks59 which are increasingly capable of providing high speed internet connectivity. However, competition and wireless technologies have eroded the revenues of fixed line USPs as the percentage of fixed line voice call minutes declines and the percentage of mobile voice call minutes grows. This development impacts the ability of USPs to support USOs from cross-subsidization of line rentals and call charges. The appropriateness of USOs, devised in a voice focused circuit switched environment, and their funding mechanisms are now being questioned in view of technological changes and increasing consumer demands.60
55 56 57 58 59 60

ECOWAS Act A/SA.6/01/07 Articles 16, 19 and 20 Xavier P. Dr. (2006) Section 2.1 ONP Directive (1998) Recital 1 ONP Directive (1998) Article 31 Xavier P. Dr. (2006) Section 3.1 Xavier P. Dr. (2006) Sections 3.2 and 1.1

Recognition of the importance of ICTs for social and economic development raises awareness of the critical risks of permitting the digital divide permeated by current narrowband policy to be further aggravated by a broadband divide that marginalizes population segments without access.61 As the use of the Internet becomes more widespread the greater the possibility of social exclusion becomes for those without access. This possibility gains significance with the realization that governments are increasingly using e-government strategies to engage public opinion on governance issues. US is no longer viewed as being driven by social inclusion obligations but by governance imperatives and as public services are increasingly delivered via the Internet the present digital divide could exacerbate the exclusion of social groups reliant on public services because the delivery of public services will not be universal.62 Growth of IP-enabled NGNs services like IP-based video, telephony and triple-play services are gathering critical mass leading to a shift to unified IP networks with multiservice platforms that carry voice as one of a range of services. This transition brings many benefits but also concerns that migration from PSTN to NGN will be uneven in both developed and developing countries with rural and remote populations being left out.63 By 2011 global teledensity was reported to be more than 100% with 6.92 billion connections, 5.6 billion of which are mobile connections with 1.32 billion fixed line connections. While this does not represent 100% US, the goal is getting closer. 64 By 2010 mobile, fixed-line, internet subscription and fixed-broadband penetration rates in the United States were 89.86%, 48.7%, 28.7% and 27.62% respectively. In the same year penetration rates for mobile, fixed-line, internet subscriptions and fixedbroadband in the EU were 122.5%, 38%, 24.03% and 23.69% respectively. (Internet subscription rates for Austria, Finland, Germany, Latvia and Spain were not available for 2010.) In the ECOWAS region the penetration rates for mobile, fixed-line, internet subscriptions and fixed-broadband were 54%, 2.03%, 0.81% and 0.31% respectively. (Data on internet subscriptions for Benin, Cote dIvoire, Gambia, Guinea, Guinea Bissau, Liberia, Mali, Niger and Sierra Leone as well as data on fixed-broadband subscriptions for Guinea Bissau and Sierra Leone for 2010 were unavailable). 65 The high penetration rates for mobile in the United States and the EU, and the preference for the mobility offered by mobile communications, raises questions as to whether connection to the fixed public telephone network should continue to remain a USO in the United States and the
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AkueKpakpo and Msimang, (2005) Section 3.2.1 Huntley et al (2004) Section 1 Xavier P. Dr. (2006) Section 2.1 Lennighan, M. (2011) Total Telecom ITU (2011) ICT Data and Statistics

EU. In the Czech Republic connection to the public telephone network and access to publicly available telephone service at a fixed location with functional internet access is no longer imposed because of 98% geographical coverage with 99% of the population covered by public mobile telephone networks.66 Technological advances and competitive market forces have provided an increasing array of communications access with transmitting and processing capabilities that include mobile phones, two-way pagers, debit cards, traditional fixed voice telephone, fixed or mobile computers and shared terminals in community access points.67 These provide widely available access to both voice and data communications and question the rationale of maintaining connection to a public telephone network as a USO. Other services that have been withdrawn from the elements of the USO in EU countries include; provision of a public pay telephone in Austria, Netherlands and Denmark; provision of a telephone directory enquiry service in Ireland, Italy and Switzerland; and, provision of a printed telephone directory in Norway and Denmark, with Spain giving consideration to similar action. 68 While teledensity figures for fixed-line access in the ECOWAS region and most developing countries are very low, mobile connections are growing rapidly and global mobile data traffic is expected to grow 26-fold between 2010 and 2015 at an annual growth rate of 92%. Of this total, the Middle East and Africa are expected to undergo the strongest growth rates at an annual compound rate of 129%.69 Mobile communications provides developing countries mass market access to both voice and data services as mobile networks and devices are increasingly capable of high data rates providing broadband internet connections. Governments in developing countries should examine the role that mobile networks can play in helping to achieve US as opposed to relying on the standard USOs imposed on incumbent operators alone. There will continue to remain a necessity for US to ensure that all citizens of our global networked society are given equal access to the new Information Society in which we collectively live. However, there is a need to rethink the manner in which US is approached in an increasingly NGN environment. New rules for US need to be made bearing in mind the following:
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USOs can cause inefficiencies and market distortions by restricting competition and the availability of technology choice in

BEREC (2010) Section 3 Mueller, M. (1997) BEREC (2010) Section 3 Coyle, D. and Williams, H. (2011) Overview

rural/remote areas, suppress market development, subsidize services many users may be able to pay for in normal commercial transactions, and imposing a considerable cost on consumers; subsidies should be kept to the minimum necessary to avoid imposing an unreasonable cost burden on economic consumers and market participants and thereby distort the extent and speed of technological innovation and investment; primary reliance should be on market-based approaches that are competition and technology neutral to facilitate the development of market-based, commercially attractive alternatives that increase market supply; USO programs need to be designed to target those with social needs and put competitive pressure on suppliers to provide services at the lowest possible cost; and, that minimal intervention should be applied to avoid the stifling of dynamic market processes with adverse competitive, economic and social consequences in the long-term.70

Conclusion
The concept of US, providing a utility considered essential for social inclusion and development at an affordable price outside of normal market interactions71, and the imposition of USOs have considerably enhanced the availability, affordability and accessibility of electronic communications networks and services. However, competitive markets coupled with rapid technological change and increased consumer needs in a global networked society challenge the present scope and application of USOs. In keeping with the intent of the USD this necessitates a rethink of USOs to address concerns of whether the present USOs can be maintained in an NGN environment and how the scope of USOs needs to be changed.72 This requires a re-examination of what USOs should be, how can they best be funded and how the competitive market interactions can be used to facilitate US. Regulatory authorities must be mindful that an approach of minimal intervention and effective competition can be helpful in spurring innovations using new technologies that assist in providing US in a technology neutral and low cost manner.

70 71 72

Xavier P. Dr. (2006) De Minico G. (2011) Xavier P. Dr. (2006) Executive Summary

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