Report on Universal Service Fundsin the

Sub-Saharan Africa Regionpresented to the

ITU Regional Office for Africa

Introduction • Prepared by Edgardo Sepulveda • Objective is to present the specific

experience of UASF's in SSA Region • Based on primary data collected

directly from the SSA Region countries via a questionnaire

• and on secondary national-level economic, demographic and telecommunications-related data obtained from international sources.

Mechanisms to promote UAS

• Traditional state-owned monopoly • Model License-based

roll-out/coverage obligations• Market-Based Reform - Competition • Market-Based Reform – Privatization• Establishment of UASF• Government-funded initiatives.

Collection • The most common and generally most

sustainable financing mechanisms is telecoms sector levies/contributions

• Other forms of financing includes direct funding from Government or the proceeds from privatizations, auctions, license fees

• The best practice is to calculate sector contributions based on a percent of revenues.

Administration

• Legally independent and separate administrative entity, UASF, that controls the UASF account

• Legally dependent and distinct administrative entity that controls the USF

• Third-Party entity administers and manages the USF account

• Establishment of the USF account only

Size

• Most UASF's mechanisms generally collect less than 5% of sector revenues

• Usually in the range of 0.5% to 2.5%. • The largest UASF's in the world are in

India (about US $450-500 million per year collected) and in the United States (about $5,600-6,000 million per year collected).

UAS Providers (USPs)

• Prior-designation of USP (One operator, typically incumbent fixed operator, is obligated to provide/maintain designated services

in designated area) ;• Project-by-project selection of

USPs (the designation, on a project-by-project basis, of one operator to provide and maintain, on a mandatory basis the UAS)

UAS conceptual framework

accessmarket

efficiency gap

existing access zone

Incom

e /

revenues

Remoteness / cost

accessreal

economic gap

Universal Access – Zone and Gaps

Countries in the Study

• 48 ITU Member-States in the SSA Region

• A total of 26 countries responded to the Questionnaire by May 6, 2009

• 22 Non responders

26 Responder Countries

Benin Gambia Mali Burkina Faso Ghana Mauritania Burundi Guinea Niger Cameroon Guinea-Bissau Nigeria Cape Verde Ivory Coast Rwanda Chad Lesotho Sao Tome &

Principe D. R. Congo Liberia Tanzania Equatorial Guinea

Madagascar Togo Ethiopia Malawi

22 Non-Responder Countries

Angola Kenya South Africa Botswana Mauritius Sudan Central African Republic

Mozambique Swaziland Comoros Namibia Uganda Congo Senegal Zambia Djibouti Seychelles Zimbabwe Eritrea Sierra Leone Gabon Somalia

UASF's in Responder Countries • 18 out of the 26 countries have

legally created UASF’s • 7 of the remaining 8 countries not yet

created UASF's expect to create it in the future

• 10 countries have operational UASF's (collect or disburse monies)

o Burkina Faso/D. R. Congo/Ghana/Ivory Coast/Madagascar/Mali/Mauritania/Nigeria/ Rwanda/Togo

Collection & Disbursement

• Collection per year about US$ 118 Ms• Total cumulative of about US$ 396 Ms • Disbursement cumulative total of

about US$ 38 Ms o Ghana/Madagascar/Nigeria/Rwanda/Togoo cumulative total disbursements 9.6%

Administration & Governance of UASF's

• Administrative Entity or Account o No Disburse > Account only o Yes Disburse > Administrative Entity & Account

• Distinct and Separateo No Disburse > Account managed by the NRA o Yes Disburse > Distinct, but not Separate

• Single or Multi-sector o no significant difference between the No and Yes

Disburse

Administration & Governance of UASF's (ctnd)• Governance of UASF’s

o No Disburse > Management Committee, chaired by a Minister

o Yes Disburse > governed by a “Board of UASF’s or NRA”

• FTE staff in UASF’so No Disburse > “0” (zero) full-time equivalent staff o Yes Disburse > is “About 9”

• Strategic and/or Operational Plano No Disburse > is “No” o Yes Disburse > is “Yes”

Administration & Governance of UASF's (conclusion)

UASF's that have been established as distinct Administrative Entities, governed by a Board (of the UASF or the NRA) with a handful of dedicated staff and a strategic plan are more likely to be able to disburse USF monies.

Projects & Modalities of UASF's

No significant variation between countries with respect to the Projects awarded and the Project-related modalities :o Most countries have implemented 3 or 4 types of projectso Most Projects were awarded based on a competitive

selection process, and the subsidy level was established by selected candidate based on its proposal.

o In terms of services, there was a focus on some combination of public voice access, private voice service and public Internet access.

o Generally, most countries allowed all eligible operators to participate in the selection process. While there was some cost-sharing, in most cases the projects were 100% UASF’s financed.

Consultant Analysis

• Countries followed reform-oriented recs to create/establish UASF's

• Legal/administrative framework of UASF's in Countries is consistent with those of outside the SSA Region

• Collection mechanism of the UASF's is consistent with those of outside the SSA Region.

Consultant Analysis (Ctnd)

• The disbursement mechanisms UASF's is consistent with those in low income countries outside the SSA Region

• Note that the disbursement ratio issue is likely also a problem among those Non-Responder Countries that have established UASF's

Consultant Recommendations

• Rec #1: Establish a UASF’s as a distinct Administrative entity, governed by a Board (of the UASF’s or the NRA) with a group of dedicated staff.

• Rec #2: Make it a legal requirement that the UASF’s shall operate based on a Strategic Plan.

Consultant Recommendations (Ctnd)

• Rec #3: Outsource the UASF’s disbursement function to professional third-party commercial entities.

• Rec #4: Establish a sunset provision on UASF's so that their performance may be reviewed every 4-5 years and they may be disbanded if necessary, with any surplus monies returned to the operators in proportion to which they paid and/or transferred.

Consultant Recommendations (Ctnd)

• Rec #5: Establish a graduated collection amount, with a relatively modest maximum in the range of 1-2% of sector revenues that varies year-by-year depending on the demonstrated capacity of the UASF’s to disburse.

Consultant Recommendations (Ctnd)

• Rec #6: Undertake practical capacity-building based on learning-by-doing, including the identification, design, tendering and awarding of projects. The initial focus of such activities could be on targeted pilot projects involving limited geographic areas, rather than large-scale national deployments. The pilot projects should be designed to maximize a successful outcome while also providing step-by-step implementation experience and support for the UASF's.

Consultant Recommendations (Ctnd)

• Rec #7: International and regional development partners do not generally need to focus on providing subsidy financing – money is not an issue for UASF's in Responder Countries. Rather, they should focus on providing hands-on and comprehensive technical assistance to help the UASF's disburse once they have been established.

THANKS FOR YOUR ATTENTION