BuddeBlog

USO/USF well served the good old POTS

Most developed countries have a government scheme ensuring that all its citizens have access to a telephone. But, while this system has served us well over the last 20 or 30 years, in the last five years or so it has become rather obsolete. 

The Funds set up under these schemes were basically used to provide subsidies to the incumbents for so-called economically unviable services. However, with the arrival of universal mobile, the foundation of the scheme has become shaky. 

The arrival of the Internet and the availability of broadband have further weakened the old model and most countries agree that the USO/USF needs to be reviewed. Unfortunately however, due to heavy lobbying by the incumbents, most countries are looking at simply tweaking the old system to facilitate any new (broadband) requirements - and, as we at BuddeComm have been arguing for many years, this is a futile approach. 

Telephony no longer the issue

With mobile and VoIP over broadband the actual telephone service no longer needs such funding. The focus should shift to looking at where government funding is required to ensure that capital is available for basic broadband infrastructure, so that the infrastructure can be used by all of its citizens. The infrastructure should be technology-neutral and it should be based on outcomes laid down in specs for e-health, tele-education, smart grid, e-entertainment services etc. 

It is also important to guarantee affordability. For example, while 3G wireless broadband could be a good technological solution, its price could be prohibitive. In the very remote areas satellite will be the only solution and this would require a higher level of subsidies. But these should be established individually rather than being handed over to the telcos on an across-the-board basis. 

Separation, open networks - radical changes are needed

The key issue for a radical change, however, is that rational and effective funding would necessitate a separation between the infrastructure and the services. Therefore a truly effective USO/USF scheme could only function in those countries that have embraced open networks and have consequently embarked on infrastructure separation. 

Interestingly, if such a structure is provided the amount needed for funding is significantly lower than in vertically-integrated situations - see reference to meet-me-points, below. 

Another reason why USO/USF is slipping to the bottom of the political agenda is that under the old system the money goes to the incumbent and so, with most countries trying to improve competition, politicians are becoming increasingly wary of putting forward a case that involves ‘incumbent funding’ as this basically is the case under a regime whereby the incumbents receive most of the subsidies. 

At the same time the incumbents are the only players with truly universal network coverage and they are more than happy to support the old system - they have no intention of cooperating in the development of a new USO/USF regime. 

Reviews of these old schemes are often measured in years. In the USA and Australia the current review is now in at least its fifth year, with still no useful outcome. If we want change let us break with the past and start something new that can be implemented sooner rather than later - for instance, by breaking it up into smaller pieces, e.g. in municipalities, local communities, housing development user groups, home owners associations (apartment buildings), etc 

Australian Broadband Guarantee

Australia has found a halfway house for its universal broadband service by establishing a separate scheme, next to its USO system. The new fund, Australia Broadband Guarantee, provides broadband subsidies based on individual cases of people and communities who fall outside the national footprint. Under the scheme they receive a metro equivalent broadband service. 

The scheme has been universally praised and has also caught the attention of other countries. As a matter of fact I brought it to the attention of the Americans after the Obama Transition Team asked why their USF had not delivered a good national broadband service in the USA. 

Only the week before, at a conference I was chairing, I learned that the Australian scheme will be reviewed and most probably upgraded in 2009 to improve quality (read ‘speed’). 

There are now examples of regions with some of the lowest population densities in the country that have better broadband than many people in metro cities. Equally, low income doesn’t have to be a barrier either. 

Success can be achieved simply by doing things differently. One of the most innovative telco operators of such services is Internode (www.internode.com.au). 

For more info on the ABG see: Australia - Labor Government Policies - 2008 

Support cooperative models

When we discussed these national broadband issues in Australia back in 2006, it was also established by the industry that a cooperative approach was crucial and that the service could be provided through cooperation with a range of entities, including state governments, municipalities, local communities, rural cooperatives, local ISPs, etc. 

For that purpose the group launched a national mapping project that included the mapping of fibre infrastructure from telcos, utilities, railroads, government authorities, etc. The plan was to create one or more ‘meet-me-points’ in each community, where this infrastructure would be made available for local reticulation. Agreement was reached on a set of open access principles that regulated for interconnection (see: Global - Infrastructure - Structural Separation). We figured out that once you had the backbone fixed the business model for local access would, in most situations, work itself out. 

Under such a model it would be far more beneficial to have long fibre loops than to have tens of thousands of nodes to serve the last 300 metres or so. This network topology, of course, would greatly facilitate a competition environment, which should take place on top of the network. 

In 90% of cases this national infrastructure will be a natural monopoly, so it should be treated like any other monopolistic infrastructure, with appropriate regulation. Most of the rest (services, content, etc) would not require any specific telco regulation, while perhaps a few of the ‘value-added infrastructure’ services would need only a very light regulatory hand. 

After some false and a few problematic starts we now see that many municipalities around the world are putting themselves forward as excellent custodians of such a natural monopoly. 

They have been running infrastructure ever since they came into existence, often hundreds of years ago. They also take a long-term investment view on infrastructure funding, so they should be motivated to play a key role in broadband infrastructure. 

The city that first took the plunge and showed the way was Stockholm. They started out back in 1990, operating only the passive infrastructure, and have since been followed by Amsterdam and Singapore. In all, a few hundred municipality networks are now well and truly underway, the leaders being Sweden, USA, Canada and the Netherlands. 

Paul Budde

This entry was posted on Tuesday, November 11th, 2008 at 12:48 pm and is filed under BuddeBlog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.