Universal Service Obligation (USO) Fund in India
1. What is Universal Service Obligation?
1. What is Universal Service Obligation?
Universal service is an economic, legal and business term used mostly in regulated industries, referring to the practice of providing a baseline level of services to every resident of a country. The basic concept of Universal service is the below cost pricing of service to increase the quantity of service. Most countries fund their USO either by collecting taxes from the operators or by allocating funds through budgetary process. The third option is to allow the incumbent operator to be the designated USO provider by providing them legal and monopoly protection. Universal Service Obligation is essential to ensure that there is a balanced growth in the economic and social well-being of the masses. The Government needs to take into account the social rate of return and the economic rate of return at the time of taking decision to provide services to areas which are not commercially viable. In India the rural penetration of telecom services is lower than the urban penetration. This is because the private operators were initially reluctant to expand the network in rural areas because of the lower ARPU and the high cost of provisioning services in those areas.
2. USO Fund in India
The Universal Service Support Policy came into effect from 01.04.2002 in India. In December 2003, the
Indian Telegraph (Amendment) Act, 2003 was amended to give statutory status to the Universal Service Obligation Fund. The Fund was established with the objective of meeting the Universal Service Obligation by providing access to telegraph services to people in the rural and remote areas at affordable and reasonable prices. The resources for implementation of USO are raised through a Universal Service Levy (USL) at 5% of the Adjusted Gross Revenue (AGR) of all Telecom Service Providers. This charge is included in the licence fee which ranges from 6% to 10%. It means every consumer who makes aphone call in India contributes towards USO Fund.In addition, the Central Govt. may also give grants and loans to the USO fund.
3. Activities planned under USO Fund
The USO Fund is meant for subsidising teleom infrastructure in rural india and off late has been supporting the development of new products and services to improve ruralconnectivity. The implementation of USO related activities is carried outthrough the telecom operators both in private and public sector in India. The plan is to use this fund to susidise the cost of communication facilities including fibre and towers in rural India which can then be shared by all telecom operators. The fund supports the following activities.
(a) Installation, Operation and Maintenance of Village Public Telephone in the revenue villages identified
(b) Provision of additional rural community phones in areas after achieving the target of one Village Public Telephone in every revenuevillage
(c) Replacement of Multi Access Radio Relay Technology Village Public Telephone installed before 1st day of April 2002.-
(d) Provision of household telephones (RDELs) in rural and remote areas
(e) Provision of Broadband connectivity to villages in a phased manner
(f) Creation of general infrastructure and induction of new technological development in rural and remote areas for development of telecommunication facilities
4. Implementation of USO Fund activities
DoT has entered into Agreements with M/s BSNL and Private Operators in March 2003 for operation and maintenance of existing Village Public Telephones (VPTs), providing Rural community phone (RCP) and for installation of Rural Household Direct Exchange Lines (RDELs). Substantial progress has already been made in all these areas.
USO Fund has also been utilized to provide subsidy support for setting up and managing infrastructure sites in 500 districts for provision of mobile services in the specified rural and remote areas, where there is no existing fixed wireless or mobile coverage. In 2007-08 DoT used around Rs 2000 cr from the USO Fund to set up about 8000 telecom towers in rural India. Out of this 1000 are Wimax BTS.
USO Fund subsidy for wireless broadband had been given to BSNL for installing Wimax BTS in rural India. DoT is also considering support to the winners of Broadband Wireless Access (BWA) spectrum auction to ensure level playing field in rural area.
5. Conclusion
Nearly Rs 25,000 crore (US $ 5.5 billion) of USO Fund is lying unutlized with the consolidated USO Fund of India. This is because of the rigid rules governing the release of funds. The Government has ambitious plans to deliver mass broadband connectivity to 2.5 lakh panchayats across the country in two years. The planning commission has recommended the use of USO Fund to lay a five lakh km optic fibre cable across the country to be built by BSNL and all telecom companies will be allowed to use the facility for a nominal fee.To achieve this, the USO Fund rules are being amended to make it more flexible and help boost in rural telephony. The new rules will give Government quick access to the fund and help in increasing rural tele-density. While it is important to provide subsidy from the social point of view, the Government should ensure that these subsidies are utilized properly. The USO fund management should ensure autonomy, flexibility, transparency and accountability to achieve 100% tele-density across India.
Universal Service Obligation (USO) Fund in India
By: VS Moni
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