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Telcos Want Govt to Suspend Rs. 8 Billion USF and Ignite Payments

Telecom operators are reportedly pressing the government to suspend the industry’s annual contribution of around Rs. 8 billion i.e. @ 1.5 percent of its annual gross revenue (AGR) towards Universal Service Fund (USF), and 0.5 percent in R&D fund (Ignite).

Sources revealed that given the huge unallocated amounts in both USF/R&D funds, telecom operators are seeking a moratorium for two years or a 50 percent reduction in annual USF and R&D fund contributions.

Telecom operators contribute around Rs. 6 billion in USF and Rs. 2 billion in R&D annually. Under the law, GoP could reduce or adjust these contributions.

The funds have been historically underutilized and the size has grown to more than Rs. 100 billion, as per the documents. The objective behind the proposal is to reduce the cost of doing business and improve industry profitability.

However, sources revealed that if the government suspended the industry contribution, it might hurt the telecom sector’s expansion.

According to documents, the USF has spent around Rs. 66.044 billion to extend cellular, broadband internet, fiber optics and other telecommunication services to un-served or underserved areas but some areas in Balochistan as well as South Waziristan and Kurram districts of Khyber-Pakhtunkhwa still lack access to basic telephony and mobile broadband services.

The USF was created in 2007 to stretch cellular, broadband internet, fiber optics, and other telecommunication services to un-served or underserved areas.

All telecom companies have been contributing 1.5 percent of their revenues to the USF.

Officials revealed that USF had around Rs. 30 billion in balance and spent Rs. 66.044 billion since its inception for the expansion of telecommunication services to the underserved and unserved areas of the country.

They maintained that despite massive growth, there were many areas that remained underserved. The challenges that the USF faced were rugged terrains, sparse population, harsh weather, lack of electricity, no backhaul, and poor logistics as well as security clearance.

Some of these areas include South Waziristan, North Waziristan, Orakzai, Kurram, Jhal Magsi, Dera Bugti, Nasirabad, and Jaffarabad.

According to the sources, for the areas which do not support business plans of telecom operators, the government subsidizes projects to reach the underserved and unserved population.

According to documents, of the total Rs. 66.044 billion subsidies,

  • Ufone took a major chunk of subsidy i.e. Rs. 17.451 billion (26.42 percent)
  • PTCL, Rs. 16.134 billion (24.4 percent)
  • Telenor, Rs17.484 billion (26.47 percent)
  • Zong, Rs. 5.525 billion (8.37 percent)
  • Wateen, Rs. 4.847 (7.34 percent)
  • World Call, Rs. 1.273 billion (1.9 percent)
  • Jazz, Rs. 1.663 billion (2.5 percent).

Telecommunication coverage was around 44 percent in 2006-07, which reached around 72.8 percent since the creation of USF while covering 7771 un-served mauzas.

The official said that broadband for sustainable development program under the USF is designed to provide telecom services to the un-served mauzas across the country.

After issuance of 3G/4G licenses by the federal government, this program has been redesigned to include the broadband equivalent data (internet) services as a compulsory component.

For new projects, powering the telecommunication site through solar energy was also made a part of each project.

According to documents, 1159 BTS have been installed and 7116 mauzas have been covered. Optic fiber program is another initiative under USF that aims to promote the development of telecommunication services in rural areas to provide affordable voice telephony and basic data services.

This also requires the establishment of a stable and reliable optic fiber network in all corners of the country. This project aims to extend the connectivity to the un-served tehsil headquarters for meeting the growing requirements of voice, data, and video in these areas.

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