Telecom firms may soon pay less for universal service obligation

The Universal Service Obligation Fund is aimed at boosting telecom connectivity in rural areas

The share of the revenue private telecom operators pay the Centre for the Universal Service Obligation Fund (USOF) is likely to fall from the current five per cent. The USOF is aimed at boosting telecom connectivity in rural areas.

The Department of Telecommunications (DoT) is working on a plan to restructure the USOF. A DoT official said a detailed one had been prepared and a final decision would be taken in four to six weeks. This follows operators and industry body Cellular Operators Association of India (COAI) repeatedly asking the Centre to reduce the USOF payment to one per cent of the revenue of telecom operators.

Universal service obligation payments are much lower in other countries, including some with lower mobile penetration. For instance, the payment stands at two per cent in Colombia and Pakistan, one per cent in Brazil and 0.8 per cent in Canada. On the other hand, the level of utilisation of the fund is much higher in other countries. According to the DoT data, India has used 30 per cent of the USOF it has collected since the fund was set up in 2002-03. For some countries, utilisation stands at about 80 per cent. According to global cellular industry body GSMA, USOF utilisation in Colombia stood at 84 per cent in 2011.

According to DoT, so far, the Centre has collected Rs 52,723 crore under the USOF. However, through the past 10 years, it has allocated only Rs 15,784 crore. Between 2002-03 and 2005-06, state-run Bharat Sanchar Nigam Ltd received Rs 6,949 crore from the fund to improve connectivity in rural areas.

"The original objective of the UOSF has not been fulfilled. All operators had agreed to the five per cent levy, considering the extremely low penetration of connectivity, especially in rural areas, as it was not commercially viable for private carriers. However, most mobile operators have already reached far rural areas, which the state-owned cellular operator has failed to do. Most of the fund is lying with the government," COAI secretary-general Rajan Mathews had said recently.

In a report last year, GSMA had said the USOF payment of five per cent put a burden on Indian telecom companies, adding the government should re-design the structure — it should align funding demands on operators with their financial state, seeking alternative funding sources where appropriate. Also, the Centre should develop clear and transparent policies that were aligned with defined short- and mid-term milestones, it added.

The National Fibre Optic Network project, proposed in 2011 to connect 250,000 gram panchayats through optic fibre to provide high-speed data connectivity, is the only major project to be financed through the USOF. The deadline for the project, with an estimated expenditure of Rs 20,000 crore, has, however, been postponed a few times.