Mobile Service Companies In India Demand Immediate Utilization Or Discontinuation Of USOF

Private Telecom service providers in India have been holding a grudge with the Indian Government for forcing them to fork out money for rural development. However, what they are really upset about is the utter mismanagement of a huge financial accumulation that is simply lying idle.


What are companies complaining about?

Over a decade ago, when India’s mobile telephony was very much in its infancy, the Indian Government had created a contingency & assurance fund meant for uplifting remote regions in the communications sector. Unimaginatively christened as Universal Service Obligation Fund (USOF), the account was mandatorily to be credited by private telecom companies so that state-run telecom companies could bring telecommunications to remote villages.

Since private players wouldn’t enter such regions where profit margins were not only non-existent, but had no scope for any return on investment either, BSNL was entrusted with the duty. About 638,596 villages were expected to have telecom and broadband connectivity.

Well, the records clearly show that not only has the dream remained woefully unfulfilled, the coffers have managed to accumulate a wealth of around US$ 4.65 Billion (Rs. 27,949.91 Crores). Such a huge chunk of money is lying dormant & unutilized. Records further show that a total of US$ 8.4 Billion (Rs. 50,682.95 Crores) have been collected till date. In terms of scale, this money is equivalent to 0.25% of entire India’s GDP (Gross Domestic Product).

What are the telecom companies, suggesting? Gabriel Solomon, Public Policy Head Groupe Speciale Mobile Association (GSMA), the global association for mobile companies understands the reason of this unbalance, “One of the main reasons why such funds remain unused in many countries is that a competitive industry like telecom moves at a pace which these funds cannot keep up with

Nonetheless, telecom service companies feel that India’s rural sector is now witnessing healthy penetration of mobile & broadband, especially by the private players & hence there is no need for the USOF. They feel that instead of holding the money ransom, better incentivize this sector & encourage private players with sufficient motivational & support packages.  Do you think offering such plans will work better than what USOF has managed to achieve so far?

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