GSMA calls for review of USO fund levy

Written by feBureau | New Delhi | Updated: Apr 11 2013, 05:52am hrs
Global telecom group GSM Association is lobbying with the Indian government for removing a 5% levy on annual gross revenue of mobile operators towards the Universal Service Obligation fund, saying this will help increase investment potential of companies.

"In India, the USO fund continues to impose approximately a 5% levy on operator revenues, despite the fact that is contains over $4 billion of accumulated funds. We have called for the government to re-think and re-evaluate the need for collecting this fund," said Gabriel Solomon, head of public policy, GSMA.

The USO Fund is established with a view to providing access to basic telephone services in rural areas, but it has been underutilised.

GSMA also said that other duties and regulatory charges in India are also extremely high and this combined with low tariffs meant low cash flows for mobile operators, which may hold back expansion in rural areas.

Between 2010 and 2013, the once robust telecom sector has an accumulated debt of over R2,50,000 crore, while it is burdened by falling revenues and subscriber numbers.

The reality is that these funds have become a convenient form of taxation on the telecommunications industry and in the majority of cases, they should be closed down and the balance of monies held used to extend access to mobile services to those unable to afford them, or those groups that live in particularly remote areas, said Tom Phillips, chief regulatory and government affairs officer, GSMA. In a report issued on Wednesday, the GSMA concludes that most funds are not succeeding in delivering their stated goal of widening access to telecommunication services and that alternative market-based solutions are more effective.

The report estimates that globally more than one-third of the 64 funds surveyed have yet to disburse any of the contributions they have collected and that more than $11 billion remains undisbursed, money that could otherwise be used to extend rural coverage or lower the cost of mobile ownership. "Alternative solutions, for example private/public partnerships such as those established in Finland, have been able to deliver better and more effective outcomes," said Solomon.